Shadow economy in 2025 (%GDP)
Australia 8.89
Brazil 34.2
Canada 18.8
China 9.9
Hong Kong 13.65
India 13.6
Kenya 26.72
Nigeria 46.99
Russia 39.37
Turkey 21.55
UK 10.83
US 6.94
The study looked at 28 countries and their forecast SE to 2025
The SE can be defined as: the market-based production of and payment for legal goods and services that are deliberately concealed from public authorities.
Crucially, the prevalence of SE activity throws up considerable practical and ethical issues with which professional accountants around the world need to grapple.
Two-thirds (66%) believed that the SE will grow by 2025, with one-third (31%) believing that it will grow significantly
Only 7% said they are making efforts to improve processes to spot and handle SE activities among their clients and customers
Reducing corruption was ranked as the most popular method of tackling the SE.
Expert opinion is divided. Some state that government holds the prime responsibility, others suggest it is the responsibility of the individual to make the right choices, and a third group argue that the community has a significant potential role in establishing cultural norms and practices that discourage participation in the informal economy.
Effective management of the SE requires action at all levels – government, cities, local communities and individuals.
Uniform regulation – uniform cross-border regulation in regional blocks and improving international coordination
Tackling inequality – policies that reduce inequality and create a fairer economic system, and encourage people to care more about their society
NGO dialogue – use the expertise and knowledge of NGOs for better understanding of the causes and consequences of what is happening among the general population
Access to the legal process – democratise the law-making process and providing easier participation in law-making
Infrastructure provision – address longer-term infrastructural issues and drivers, especially in ‘areas where no economic activity was present previously
Capacity building – provide better training for government employees who are monitoring the SE
Economic alternatives – introduce government workfare programmes instead of unemployment benefits
Acceptance and accommodation – for economies with the highest levels of informal activity, this needs to be addressed in a counter-intuitive fashion. If there is unlikely to be a longer-term economy that is sufficiently robust, stable or successful for more formal forms of governance to be 'wrapped' around it, the key strategy is to embrace the SE as a source of innovation and growth.