Underground Economy

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Assignment on |

UNDERGROUND ECONOMY |

and its realm in Bangladesh |

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Assignment To:Saleh Ahmad AbdullahLecturerDept of Business AdministrationShahjalal University of Science and Technology |

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Assignment By:Syeda Fatima Banu TabiaReg. No. 2009731007Dept of Business AdministrationShahjalal University of Science & TechnologyTuesday, June 06, 2011 |

WHAT IS UNDERGROUND ECONOMY?

Underground economy, also known as black marketing or shadow economy, is the economic activity that is not observed by tax collectors and government statisticians. Underground economy is also referred to as tax evasion, tax fraud, cash pay, tax gap, payments-under-the-table & off-the-books.

Underground economy is a term that refers to those individuals & businesses that deal in cash pr/and use other schemes to conceal their monetary activities and their true tax liability from government licensing, regulatory and taxing agencies.

There is no single underground economy, there are many. Different types of underground activities are distinguished as –

* Illegal Income

* Unreported Income

* Unrecorded Income

* Informal Income

Illegal Income: The illegal income consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, as trade of illegal activities – such as, drug trafficking, arms trafficking, prostitution.

Unreported Income: The unreported income consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A complementary measure of the unreported economy is the ‘tax gap’, namely the difference between the amount of tax legally owned and the amount collected by government.

Unrecorded Income: Unrecorded income consists of those economic activities that circumvent...