Confronting the Shadow Economy

Confronting the Shadow Economy

Evaluating Tax Compliance and Behaviour Policies

Colin C. Williams

Beginning with a review of the extent of undeclared work, the author discusses the discrepancies between regions and the potential impacts of the economic crisis, comparing the nature of the potential solutions available with those actually adopted. The way forward, the book concludes, is to move away from increasing the costs of engaging in hidden work using repressive measures, and concentrate more on developing initiatives that enhance the benefits of engaging in declared work and increase the likelihood of compliance by engendering a commitment to tax morality.

Chapter 12: Conclusions

Colin C. Williams

Subjects: business and management, business ethics and trust, economics and finance, economic crime and corruption, labour economics, public choice theory, public finance, politics and public policy, political economy


The recognition that the shadow economy is extensive and composed of diverse types of work has led to a major rethinking of how to tackle this sphere. When the shadow economy was viewed as a minor practice largely composed of sweatshop-like, exploitative, waged employment, few questioned the pursuit of an eradication approach. However, the appreciation that many participate in the shadow economy, that many businesses start up operating in the shadow economy, and that in ever more market-oriented economies many previously unpaid community exchanges are monetized and conducted as paid favours has led to a rethinking of this eradication approach. It has been increasingly acknowledged that if governments continue to pursue the eradication of the shadow economy, then they will not only leave many bereft of a means of livelihood but will also with one hand stamp out precisely the enterprise culture and active citizenship that with other hands they are so desperately seeking to foster. The outcome therefore, has been a rethinking of the approach adopted towards the shadow economy. Rather than seek to eradicate such work, a policy turn has begun to occur towards shifting shadow work into the declared economy in order to achieve the wider goals of economic development, employment growth and social inclusion. The aim of this book has been to review this paradigmatic shift and to evaluate the range of policy approaches and measures available for achieving this objective.

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