THE IMPACT OF SHADOW ECONOMY ON GOVERNMENT REVENUE IN CROSS RIVER STATE
Keywords:
shadow-economy, government-revenue, tax-evasion/avoidance, wood-felling, smuggling
Abstract
This work examined the impact of shadow economy on government revenue in Cross River State, Nigeria. The study further reiterates the fundamental role of government revenue in any nation’s quest for economic growth and development and argues that any state or nation that does not efficiently utilize its revenue streams will not have any advancement in economic growth. The study is of the view that the bitter and frustrating experiences of Cross River State government since the beginning of the democratic era and its fervent attempt to develop underlie the need to redirect attention to the effective and efficient utilization of its revenue and expenditure sources to ensure sustainable economic growth and development. Data were generated through a stratified random sampling from four-hundred and fifty-one (451) respondents. Simple percentages, as well as Ordinary Least Squares techniques, were used for the analysis and the result revealed that: there exist a significant and negative effect between tax evasion and avoidance and illegal felling of wood on sources of government revenue; the result also indicatedthe existence of a positive and significant effect between oil bunkering and sources of government revenue, but positive and insignificant relationship between smuggling and sources of government revenue. Based on this, the work recommended among others that Cross River State government should introduce modalities and stringent measures that will address loopholes in tax laws and introduce friendly procedures to encourage voluntary tax compliance.
References
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Alexandru A, Dobre I., &Ghinararu C., (2009). Estimating the Size of Romanian Shadow Economy Using the Currency Demand Approach, Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), 623-631, May.
Altman, M., (2008). Formal-informal economy linkages, Human Sciences Research Council (HSRC), Pretoria.
Andrei, T., (2011). Relations de causalitéentre l‘economiesouterraine et les variables macroéconomiques: application sur la Roumanie, RevistaRomână de Statistică, nr. 3, 2011, 86-100.
Aruoba, S.B., ( 2010). Informal Sector, Government Policy and Institutions, 2010 Meeting Papers 324, Society for Economic Dynamics.
Barro, R. & Sala- i-Martin, X.,( 1995). Economic Growth, New York: McGraw-Hill.
Besozzi, V. (2012). Determinants of Shadow Economy. Functioning and Distributing, Business Inform, 11: 25-29.
Bhattacharyya, R. (1999). Formal, informal economy linkages: Implications for poverty in South Africa, Law, Development and Democracy, 14, 133-158.
Bongardt, A., Torres, F., Hefeker, C, Wunsch, P., & Hermann, P. (2013). Convergence in the EU, Intereconomics, Vol 48, No 2.
Bruno, C. (1982). Demand for Currency and the Black Economy in the UK. Retrieved from http://www.emeraldinsight.com/doi/abs/10.1108/eb002537.
Buehn, A., & Schneider, F., (2007). Shadow Economies and Corruption All Over the World: Revised Estimates for 120 Countries. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 1, 2007-9 (Version 2), http://www.economics-ejournal.org/economics/journalarticles/2007-9.
Buehn, F.& Schneider, A(2012) Shadow Economies around the World: Novel Insights, Accepted Knowledge and New Estimates. International Tax and Public Finance, 19 (1), 139–171
Buehn,Q& Schneider, A (2012). Corruption and the shadow economy: like oil and vinegar, like water and fire?.International Tax and Public Finance, 19 (1), 172–194
Charles, S.W., (2011). Institutional quality and economic growth in Latin America, Global Economy Journal, 10(4).
Ciuiu, D, (2010). “Modeling the fraud-like investment funds by Petri nets,” MPRA Paper 23589, University Library of Munich, Germany.
David, M. O. (1983). Currency Demand Modeling In Estimating The Underground Economy: A Critique on “Excess Sensitivity” Method and Support for VAR Framework.
Davies, R., &Thurlow, J.,( 2009). Formal-informal economy linkages and unemployment in South-Africa. Human Sciences Research Council, Centre for poverty employment and growth.
Delbca, E. (1981). Informality and Productivity: Productivity Differentials between Formal and Informal Firms in Turkey, ERC Working Papers 0901, ERC Economic Research Center, Middle East Technical University.
Dell ́Anno, R. & Solomon (2008). The shadow economy in Portugal: An analysis with the MIMIC approach. Journal of Applied Economics, X, 253–277.
Dell‘Anno, R., (2007). The shadow economy in Portugal: an analysis with the MIMIC approach, Journal of Applied Economics. Vol X, No. 2 (Nov 2007), 253-277.
Dickey,D&Fuller,W (1981). Likelihood ratio statistics for autoregressive time series with a unit root Econometrica, 49 (1),1057–1072
Dreher, A., & Schneider F., (2006). Corruption and the Shadow Economy: an Empirical Analysis, CESifo Working Papers Series 1613, CESifo Group Munich.
Dreher, H. & Schneider F. (2008). The monetary method to measure the shadow economy: The forgotten problem of the initial conditions. Economics Letters, 101, 97–99.
Drennan, M.P.; Lobo, J.,&Strumsky, D. (2004). Unit root tests of sigma convergence across US metropolitan areas. Journal of Economic Geography, 4,(1), 583-595.
Elgin, C., & Garcia, M.S.,( 2011). Public Trust, Taxes and the Informal Sector, Working Papers 2011/04, Bogazici University, Department of Economics.
Elgin, C., &Oztunali, O., (2013). Institutions, Informal Economy and Economic Development, Working Papers 2013/03, Bogazici University, Department of Economics.
Elgin, C., (2010). Political Turnover, Taxes and the Shadow Economy, Working Papers 2010/08, Bogazici University, Department of Economics.
Elgin, C., &Oztunali, O. (2012). Shadow economies around the world: Model Based Estimates, Working Papers 2012/05, Bogazici University, Department of Economics.
Feige, E. L. & Urban, C. (2008). The Underground Economies: Tax Evasion and Information Distortion. Retrieved from http://www.amazon.com/The-Underground-Economies-Information-Distortion/dp/0521262305.
Feld, M. & Larsen, A. (2005). The shadow economy in Europe - 2005, Johannes Kepler University, Linz, Austria.
Feld, M. & Schneider, F. (2010). The shadow economy in Europe – 2010, Johannes Kepler University, Linz, Austria.
Feld, M., Schneider F. & Schmidt, D. (2007). Beyond the Veil of Ignorance: The Influence of Direct Democracy on the Shadow Economy, CESifo Working Papers Series 3749, CESifo Group Munich.
Franz, J. T. (1984). Tax evasion and the demand for currency in Norway and Sweden. Is there a hidden relationship? The Scandinavian Journal of Economics, 86, 423–439.
Frey, B.S., &Pommerehne, W., (1984). The Hidden Economy: State And Prospects For Measurement, The Review of Income and Wealth.
Gatti, R., Honorati, M., (2008). Informality among formal firms: firm-level, cross-country evidence on tax compliance and access to credit, Policy Research Working Papers Series 4476, The World Bank.
Geertz, C. (1999). Estimates of the underground economy in Australia. Economic Record, 75, 369–384. doi:10.1111/j.1475-4932.1999.tb02573.
Gheorgho, E. &Zizi, L. (2014). Defining and estimating underground and informal economies: The new institutional economics approach. World Development.
Giles, D. E. (1999). Measuring the hidden economy: Implications for Econometric Modelling. The Economic Journal, 109, F370–F380.
Hart, K., (2008). Informal economy. The New Palgrave Dictionary of Economics, Palgrave Macmillan.
Johnson, S., Kaufmann, D. &Zoido-Lobaton, P., (1998). Regulatory Discretion and the Unofficial Economy, American Economic Review 88, nr.2.
Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
Kelly, C. (2005). Unemployment and the underground economy in Australia. Applied Economics. doi:10.1080/0003684042000291335.
Koba, M., (2013). $2 trillion underground economy aids recovery, USA Today, http://www.usatoday.com/story/money/business/2013/05/12/2-trillion-dollar-underground-economy-recovery-savior/2144279/in press.
Koeda, J. &Dabla-Norris, E., (2008). Informality and Bank Credit: Evidence from Firm-Level Data, IMF Working Papers 08/94, International Monetary Fund.
Pisica, S. et al, 2012, Piaţamunciiîntre formal şi informal, Editura Expert.
Romana, M. A. (2012). The relationship between shadow economy and unemployment rate. A ARDL causality analysis for the case of Romania. National Scientific Research Institute for LabouraNd Social Protection, Bucharest Department of Statistics and Econometrics, Academy of Economic Studies, Buchares.
Schneider F. &Torgler, M. (2007). Size and Development of the Shadow Economy of 31 European Countries from 2003 to 2010, ShadEcEurope31_2010.doc.
Schneider, F. (2013). Shadow Economies around the world: What do we really know? European
Schneider, F. and Enste, D.H. (2000). “Shadow economies: size, causes and consequences”. Journal of Economic Literature, 38 (1), 77-114.
Schneider, F., &Enste, D., (2003). Hiding in the Shadows: The Growth of the Underground Economy. Economic Issues No. 30: The International Monetary Fund, http://www.imf.org/external/pubs/ft/issues/issues30/index.htm
Singh, A., Jain-Chandra S.,&Mohommad, A., (2012). Inclusive Growth, Institutions and the Underground Economy, IMF Working Papers 12/47, International Monetary Fund.
Tanzi, V. (1983). The Underground Economy in the United States: Annual Estimates, 1930-80 (L’économie clandestine aux Etats-Unis: estimations annuelles, 1930-80) (La “economÃasubterránea” de EstadosUnidos: Estimacionesanuales, 1930-80). IMF Staff Papers, 30(2), 83–305. html
Thomas, J. (1999). Quantifying the black economy: “measurement without theory” yet again? The Economic Journal,, 381–389.
Tiho-Yoo, F. & Jim, K. H. (1998). The Shadow Economy: Theoretical Approaches, Empirical Studies, and Political Implications.
Torgler, B. & Schneider, F. (2009). ‘The impact of tax morale and institutional quality on the shadow economy’, Journal of Economic Psychology, 30, 2, pp. 228-245.
Van Eck, R. (1988). Secondary Activities and the National Accounts, Working paper, Central Bureau of Statistics, Voorburg.
Zaman, Gh.,Goschin, Z., (2013). A New Approach to Shadow Economy Metrics of International Comparisons for EU Countries, 609-631, in Elena Hlaciuc, IonelBostan (editors) European Research Development in Horizon 2020, Lumen Media Publishing, United Kingdom, United Sates of America, Romania
Alexandru A, Dobre I., &Ghinararu C., (2009). Estimating the Size of Romanian Shadow Economy Using the Currency Demand Approach, Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), 623-631, May.
Altman, M., (2008). Formal-informal economy linkages, Human Sciences Research Council (HSRC), Pretoria.
Andrei, T., (2011). Relations de causalitéentre l‘economiesouterraine et les variables macroéconomiques: application sur la Roumanie, RevistaRomână de Statistică, nr. 3, 2011, 86-100.
Aruoba, S.B., ( 2010). Informal Sector, Government Policy and Institutions, 2010 Meeting Papers 324, Society for Economic Dynamics.
Barro, R. & Sala- i-Martin, X.,( 1995). Economic Growth, New York: McGraw-Hill.
Besozzi, V. (2012). Determinants of Shadow Economy. Functioning and Distributing, Business Inform, 11: 25-29.
Bhattacharyya, R. (1999). Formal, informal economy linkages: Implications for poverty in South Africa, Law, Development and Democracy, 14, 133-158.
Bongardt, A., Torres, F., Hefeker, C, Wunsch, P., & Hermann, P. (2013). Convergence in the EU, Intereconomics, Vol 48, No 2.
Bruno, C. (1982). Demand for Currency and the Black Economy in the UK. Retrieved from http://www.emeraldinsight.com/doi/abs/10.1108/eb002537.
Buehn, A., & Schneider, F., (2007). Shadow Economies and Corruption All Over the World: Revised Estimates for 120 Countries. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 1, 2007-9 (Version 2), http://www.economics-ejournal.org/economics/journalarticles/2007-9.
Buehn, F.& Schneider, A(2012) Shadow Economies around the World: Novel Insights, Accepted Knowledge and New Estimates. International Tax and Public Finance, 19 (1), 139–171
Buehn,Q& Schneider, A (2012). Corruption and the shadow economy: like oil and vinegar, like water and fire?.International Tax and Public Finance, 19 (1), 172–194
Charles, S.W., (2011). Institutional quality and economic growth in Latin America, Global Economy Journal, 10(4).
Ciuiu, D, (2010). “Modeling the fraud-like investment funds by Petri nets,” MPRA Paper 23589, University Library of Munich, Germany.
David, M. O. (1983). Currency Demand Modeling In Estimating The Underground Economy: A Critique on “Excess Sensitivity” Method and Support for VAR Framework.
Davies, R., &Thurlow, J.,( 2009). Formal-informal economy linkages and unemployment in South-Africa. Human Sciences Research Council, Centre for poverty employment and growth.
Delbca, E. (1981). Informality and Productivity: Productivity Differentials between Formal and Informal Firms in Turkey, ERC Working Papers 0901, ERC Economic Research Center, Middle East Technical University.
Dell ́Anno, R. & Solomon (2008). The shadow economy in Portugal: An analysis with the MIMIC approach. Journal of Applied Economics, X, 253–277.
Dell‘Anno, R., (2007). The shadow economy in Portugal: an analysis with the MIMIC approach, Journal of Applied Economics. Vol X, No. 2 (Nov 2007), 253-277.
Dickey,D&Fuller,W (1981). Likelihood ratio statistics for autoregressive time series with a unit root Econometrica, 49 (1),1057–1072
Dreher, A., & Schneider F., (2006). Corruption and the Shadow Economy: an Empirical Analysis, CESifo Working Papers Series 1613, CESifo Group Munich.
Dreher, H. & Schneider F. (2008). The monetary method to measure the shadow economy: The forgotten problem of the initial conditions. Economics Letters, 101, 97–99.
Drennan, M.P.; Lobo, J.,&Strumsky, D. (2004). Unit root tests of sigma convergence across US metropolitan areas. Journal of Economic Geography, 4,(1), 583-595.
Elgin, C., & Garcia, M.S.,( 2011). Public Trust, Taxes and the Informal Sector, Working Papers 2011/04, Bogazici University, Department of Economics.
Elgin, C., &Oztunali, O., (2013). Institutions, Informal Economy and Economic Development, Working Papers 2013/03, Bogazici University, Department of Economics.
Elgin, C., (2010). Political Turnover, Taxes and the Shadow Economy, Working Papers 2010/08, Bogazici University, Department of Economics.
Elgin, C., &Oztunali, O. (2012). Shadow economies around the world: Model Based Estimates, Working Papers 2012/05, Bogazici University, Department of Economics.
Feige, E. L. & Urban, C. (2008). The Underground Economies: Tax Evasion and Information Distortion. Retrieved from http://www.amazon.com/The-Underground-Economies-Information-Distortion/dp/0521262305.
Feld, M. & Larsen, A. (2005). The shadow economy in Europe - 2005, Johannes Kepler University, Linz, Austria.
Feld, M. & Schneider, F. (2010). The shadow economy in Europe – 2010, Johannes Kepler University, Linz, Austria.
Feld, M., Schneider F. & Schmidt, D. (2007). Beyond the Veil of Ignorance: The Influence of Direct Democracy on the Shadow Economy, CESifo Working Papers Series 3749, CESifo Group Munich.
Franz, J. T. (1984). Tax evasion and the demand for currency in Norway and Sweden. Is there a hidden relationship? The Scandinavian Journal of Economics, 86, 423–439.
Frey, B.S., &Pommerehne, W., (1984). The Hidden Economy: State And Prospects For Measurement, The Review of Income and Wealth.
Gatti, R., Honorati, M., (2008). Informality among formal firms: firm-level, cross-country evidence on tax compliance and access to credit, Policy Research Working Papers Series 4476, The World Bank.
Geertz, C. (1999). Estimates of the underground economy in Australia. Economic Record, 75, 369–384. doi:10.1111/j.1475-4932.1999.tb02573.
Gheorgho, E. &Zizi, L. (2014). Defining and estimating underground and informal economies: The new institutional economics approach. World Development.
Giles, D. E. (1999). Measuring the hidden economy: Implications for Econometric Modelling. The Economic Journal, 109, F370–F380.
Hart, K., (2008). Informal economy. The New Palgrave Dictionary of Economics, Palgrave Macmillan.
Johnson, S., Kaufmann, D. &Zoido-Lobaton, P., (1998). Regulatory Discretion and the Unofficial Economy, American Economic Review 88, nr.2.
Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
Kelly, C. (2005). Unemployment and the underground economy in Australia. Applied Economics. doi:10.1080/0003684042000291335.
Koba, M., (2013). $2 trillion underground economy aids recovery, USA Today, http://www.usatoday.com/story/money/business/2013/05/12/2-trillion-dollar-underground-economy-recovery-savior/2144279/in press.
Koeda, J. &Dabla-Norris, E., (2008). Informality and Bank Credit: Evidence from Firm-Level Data, IMF Working Papers 08/94, International Monetary Fund.
Pisica, S. et al, 2012, Piaţamunciiîntre formal şi informal, Editura Expert.
Romana, M. A. (2012). The relationship between shadow economy and unemployment rate. A ARDL causality analysis for the case of Romania. National Scientific Research Institute for LabouraNd Social Protection, Bucharest Department of Statistics and Econometrics, Academy of Economic Studies, Buchares.
Schneider F. &Torgler, M. (2007). Size and Development of the Shadow Economy of 31 European Countries from 2003 to 2010, ShadEcEurope31_2010.doc.
Schneider, F. (2013). Shadow Economies around the world: What do we really know? European
Schneider, F. and Enste, D.H. (2000). “Shadow economies: size, causes and consequences”. Journal of Economic Literature, 38 (1), 77-114.
Schneider, F., &Enste, D., (2003). Hiding in the Shadows: The Growth of the Underground Economy. Economic Issues No. 30: The International Monetary Fund, http://www.imf.org/external/pubs/ft/issues/issues30/index.htm
Singh, A., Jain-Chandra S.,&Mohommad, A., (2012). Inclusive Growth, Institutions and the Underground Economy, IMF Working Papers 12/47, International Monetary Fund.
Tanzi, V. (1983). The Underground Economy in the United States: Annual Estimates, 1930-80 (L’économie clandestine aux Etats-Unis: estimations annuelles, 1930-80) (La “economÃasubterránea” de EstadosUnidos: Estimacionesanuales, 1930-80). IMF Staff Papers, 30(2), 83–305. html
Thomas, J. (1999). Quantifying the black economy: “measurement without theory” yet again? The Economic Journal,, 381–389.
Tiho-Yoo, F. & Jim, K. H. (1998). The Shadow Economy: Theoretical Approaches, Empirical Studies, and Political Implications.
Torgler, B. & Schneider, F. (2009). ‘The impact of tax morale and institutional quality on the shadow economy’, Journal of Economic Psychology, 30, 2, pp. 228-245.
Van Eck, R. (1988). Secondary Activities and the National Accounts, Working paper, Central Bureau of Statistics, Voorburg.
Zaman, Gh.,Goschin, Z., (2013). A New Approach to Shadow Economy Metrics of International Comparisons for EU Countries, 609-631, in Elena Hlaciuc, IonelBostan (editors) European Research Development in Horizon 2020, Lumen Media Publishing, United Kingdom, United Sates of America, Romania
Published
2019-10-31
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