The level of the shadow economy, tax evasion and corruption: The empirical evidence for SEE countries

Abstract

Economic theory and practice of developed countries have shown that the good functioning of market economies requires the existence of stable institutions that are effective in the application of legal rules as a precondition for the proper functioning of the economic and fiscal system.In the process of building a market economy in Southeast European countries, along with the sector of legal economy there coexists a large sector of shadow economy, tax evasion and high levels of corruption.Analyses made by many authors and relevant national and international institutions estimate that the amount of the shadow economy, tax evasion and corruption in the analyzed countries despite a declining trend in the last decade continues to be at the level of 25-50% compared with the legal sector of the economy.The author aims through a comparative approach to analyze the level of the shadow economy, tax evasion and corruption in the economies of Southeast Europe and provides some recommendations for governments to overcome these negative phenomena.