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RESEARCH PRODUCT

Tax Evasion: Part of the Underground Economy in Romania

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The economies of developed or emerging countries have a component not subject to the eyes of the authorities, the underground economy, the size of which is likely to produce many imbalances and inequities. The attempt to mitigate state revenues by exploiting legislative imperfections or by using ingenious methods to avoid the payment of taxes is called tax evasion. The weight of the underground economy in Romania’s GDP is significant, with the percentage ranging from 22.4% to 28.4%. The European Union average is 10 p.p. lower than the level at which Romania is located, at the opposite end being Austria, Luxembourg and the Netherlands. The underground economy is predominantly dominated by black work and non-tax revenue. Measures taken at European and national level aim at eliminating legislative breaches, encouraging card payments, increasing compliance by improved tax morale and an effective monitoring and control system by the authorities.