Payment by credit card will help reduce the gray zone – eGospodarka

According to the study EY Fri. “Reducing the informal economy through electronic payments”, conducted by MasterCard, the increased popularity of non-cash transactions can significantly contribute to reducing the gray economy and, thus, increase the income of the state – and not the amounts small.

gray economy and tax gap

the Grey zone is responsible for an important part of the tax gap, which is payable to the general government revenues that do not go to the state coffers.

In 2004, the underground economy amounted to 19% of GDP, then decreased, but since the economic crisis in 2008, remained at a level close to 13% of GDP. In 2014. Amounted to 12.4% of GDP, ie approx. 214 billion zł, and – only in respect of the same CIT and VAT – accounted for at least 40.3 billion zł the loss of government revenues – says Marek Rozkrut, Partner Team Economic analysis and Chief Economist EY.

The other elements of the tax gap are:

• extortion tax
• tax evasion, eg. Through the manipulation of data or the use of transfer pricing in a manner inconsistent with the law,
• as well as the loss of revenue due to corporate bankruptcies, disputes with the state administration and billing errors.

EY solved a number of methodological problems, which many studies have led to a significant revaluation of the gray zone, including Poland. EY estimated by the level of shadow economy turns out to be consistent with available estimates of the VAT gap in Poland.

Active and passive gray zone

Although the same gray area has many different “shades”, is a common element for the vast most of the unregistered transactions is that they are carried out in cash. From this point of view, a gray area may be divided into a part of the active and passive. In the case of construction service or repair the vehicle at a reduced price in the absence of the invoice we are dealing with an active gray area. In this situation, both sides consciously use the additional profit and tend to hide the transaction through cash payment. In turn, the passive gray zone only one party – the seller – derives a benefit due to non-registration of the transaction. An example would be payment for a service in a restaurant cash while the lack of issuing a receipt. No receipt does not affect the price paid by the customer, but allows service providers to hide transactions and achieve additional benefits from the tax unpaid. In the gray zone of active cash is an effect, a consequence of the occurrence of the black economy and in this case, the promotion of electronic payments will not solve the problem, because both parties will consistently use cash. Another situation occurs in the case of passive gray zone, where cash payment is the source factor in niezarejestrowaniu transaction. Then the introduction of incentives or other mechanisms to promote electronic payments could significantly reduce the possibility of hiding the transactions, and thereby foster the reduction of passive gray area.

photo. auremar – Fotolia.com

Payments card will help reduce the gray zone

In Poland we have a huge potential for development when it comes to the development of cashless payments. The report EY proves that the increase in this area can have a beneficial impact on the Polish economy.

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at the same time research EY show that for all 8 analyzed countries in Central and Southern Europe (Bosnia and Herzegovina, Bulgaria, Croatia, Czech, Polish, Serbia, Slovakia and Slovenia) for the vast majority of unrecorded cash transactions meet payment passive gray zone.

In Poland, this part of the underground economy is responsible for up to 10,6% of GDP. Lost from the proceeds of the income tax and VAT is, under the conditions of 2014 at least 34 billion zł – says Marek Rozkrut. – The biggest share in the passive gray area has food, beverages and tobacco products. This is mainly due to the large share of this sector in the shopping basket and frequencies made in the cash payments. These are often shopping for a low amount made at markets and small shops without payment terminals.

At the same time it should be noted that the study conducted by EY sector focuses on passive gray area measured at the retail level. For this reason it plays a significant role of the construction industry, which in turn has a very high percentage of unregistered employment and participation in the active part of the shadow economy.