September 30, 2020

IDIS Study: Moldova, a prey of the underground economy and tax evasion

In Moldova there is no research on estimating the illegal economy. In reports on socio-economic situation in Moldova, some statistics data are missing or are incomplete, which complicates the process of doing necessary calculations for estimating or forecasting the illegal economy. This is the of the IDIS “Viitorul” expert, Gheorghe Costandachi, author of the study “”Moldova: prey of the underground economy and tax evasion”, presented Thursday, July 26.

“According to National Bureau of Statistics estimates, the illegal economy in Moldova has a stable characteristic, with small deviations in each year. Thus, in the analysed period, the unobserved economy in Moldova registered the highest level in 2011, representing 25.5%, and the lowest level – 21.3% in 2007”, said study author.

The level of the underground economy in the world is increasing. If in 1997 the average of the underground economy in the world was 32,%, in 2009 it reached 36.5%. A slight reduction of its level was registered only in 11 countries, is also presented in the study.

According to a World Bank report published in September 2010, the highest average share of the underground economy in GDP for the years 1999 to 2007 was held by Georgia with 68.8% of GDP, followed by Bolivia with 68.1% and Azerbaijan with 63. 3%. The lowest level of the underground economy was recorded in Sweden – 8.6% U.S. – 8.8% and Austria – 9.8%. In this context, Moldova registered in the period 1999-2006 an average of 45.08%.

“All problems in society: the lack of jobs, low salaries of public officials, business dependence of decision-makers, privatization spent hastily, destroying agricultural complex in Moldova, the monetary crisis in the period 1991-1994, appearance of interests for distributing of influence economic and political areas, lack of mechanisms to regulate economic processes in the new conditions, extremely corrupt judicial system; all this made inevitable the occurrence of the phenomenon of the underground (illegal) economy”, said Gheorghe Costandachi.

At the end of the study, the author comes with a number of recommendations, including for stakeholders, which, he said, should be more actively involved in the assessment of the illegal economy.

Recently, Viorica Antonov, expert associated IDIS of “Viitorul” explained how the budget is damaged because of the undeclared work, which favors the appearance of the underground economy. The consequences of this phenomenon have been presented in the 13th edition of the Social Monitor.

The study was financially supported by the National Endowment for Democracy (NED).

Source: IDIS “Viitorul”



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