ISSN: 2225-8329
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A complex and great challenge cutting across almost all types of economies from developed to developing economies is the phenomena of shadow economies. A number of factors are responsible for peoples’ involvement in such practices of shadow economies around the world. One of such factor is government policies especially those concerning taxation and regulation. Shadow economy practices such as tax evasion, results in the loss of tax revenues for the government and consequently affect government performance. The implications of loses in tax revenue is the incapacitation of the government’s ability to finance projects essential for economic growth and societal welfare. The current study revealed two major variables that can possibly influence the shadow economy level. The variables are: firstly, the probability of detection and secondly, the penalty rate. The present study therefore builds on the existing body of knowledge on taxes from a deterrence perspective. Since shadow economy is subject to individuals, this suggests that deterrence factors should be given priority, compared to other factors. The proposed framework, from a deterrence perspective, would benefit tax administrators in comprehending and mitigating the phenomenon of a shadow economy.
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To cite this article: Abuamria F. M. J. (2019). The Effect of Deterrence Factors on Discourage Shadow Economy Level and Tax Evasion, International Journal of Academic Research in Accounting, Finance and Management Sciences 9 (1): 62-67.
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