Nowadays the black market or underground economy exist in
each country despite its size and has a significant influence on its economic
development, habitant’s welfare and policy. Systems of law and tax can not be
effective with a high level of the black market. According to Austrian
ecomonics professor Friedrich Shneider ,
Lithuania takes
the 4th place in the European ranking of black economy in GDP.
The underground economy slows the growth of Lithuanian
economy. Firstly, taxes constantly get bigger to official assessable economy.
Members of black economy avoid them and in this way the budget of the country
is reduced. Secondly, informal production, incomes and expenses do not allow
accurate rates of the country’s economic condition and the development of a
rational economic and regulation policy. Such economy distorts official
statistics data. If the country’s policy is based on incorrect information, it
will be unreliable or simply irrational. Lithuanian economic growth is hampered
by the effect of black economy.
In terms of data, the underground economy has been steadily
increasing during the last decade. The black market has grown more than three
times. The informal incomes ammounted about 2000 mil. LTL (~580 mil. EUR) in
2001 and the black market rose to 7000
mil. LTL (~2000 mil. EUR) in 2011. Permanent changes of tax system and
regulation of government had a significant impact on the growth of black
economy.
The size of the shadow economy as a percentage of GDP in Lithuania shows
a different shade of variation. Considering the level of black economy in Lithuania from
2000, there is an increasing trend. It can be noted that the high level of
black economy (23% of GDP) at the beginning of this period was due to the country's
historical situation. Lithuania
regained its independence in 1990, but still had gaps of the law and judicial
systems, as well as high unemployment. However, the underground economy
declined because of the economic situation’s improvement and increasing number
of foreign investments. The level of black market accounted for about 21% of GDP from 2001 to 2004. The
greater reduction in the informal economy was after 2004. It reached 19% of
GDP. The main impact of the underground
economy had to do with entering the European Union. In this way, Lithuania had
access to EU structural funds. Thus, new workplaces were created and the
country’s economic situation was improved. The reduction in unemployment meant
the reduction in incomes of the black market. The lowest level of the shadow
economy was in 2007 (17% of GDP). During the period of economic rise, Lithuania
reached the lowest rate of unemployment (4.3%) and GDP was increasing. However,
the economic situation deteriorated, when the global crisis began. The unemployment and taxes increased, at
the same time GDP started to reduce.
These were the main reasons of the expansion of black economy. It
reached 20% of GDP in 2008. The highest level of the shadow economy was
recorded in 2010 and it was 27% of GDP. The average amount of unaccounted
income was about 25% of GDP during the last two years.
The underground economy involves the exchange of goods and
services in most economic sectors. The largest part (32%) of shadow economy
consists of smuggling of cigarettes, fuel and alcohol. For example, from 20% to
30% of cigarettes are sold in black market. The most popular cigarettes are cheap, low class brands, mainly produced
in Russia , Belarus and Ukraine . According to unofficial
data, in the internal market Lithuanian smugglers make profits of around 5 to 6
million EUR per year. The price of cigarettes can vary about three times. One
pack of cigarettes cost about 3 EUR in the market while in the black market – 1
EUR. In second place there is supplying of goods and services without paying
taxes. It consists 25% of the underground economy. In third place (23%) there
is illegal labor force and informal wages.
There are many ways to prevent the spread of the shadow
economy in Lithuania .
The government must carry a deep economic analysis in order to find out the
reasons of black market existence and sectors with the largest unaccounted
incomes. Also they have to take particular actions that must be implemented in
the near future. For instance, it is known, there is a big amount of informal
economy in the bazaar. The government might ask sellers to use
cash registers in order to calculate the real amount of incomes in this sector.
Sellers usually hide the number of sales for the purpose of avoiding paying
taxes. Also, I supposed, that the reducing of informal economy should not only
interest the government or parliamentary, but also citizens of Lithuania .
Habitants must understand that the shadow economy has an impact on their
economic well-being. People need to realize that the support of the shadow
economy is immoral. That is why the government should pay more attention on
habitant education and prevention.
Karolina
Zygmantaitė
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