INTELLECTUAL ECONOMICS 2007, Number 2(2)
Algimantas Misiūnas, Vladas RimkusPRECONDITIONS AND CONSEQUENCES OF ILLEGAL GOODS TRAFFIC
Mykolas Romeris University Publishing Centre. Vilnius. Lithuania 2007 Nr.2(2), p. 43–50
Abstract
Nature of shadow economics is destructive, as its existence contradicts to public order and interests. Shadow economics avoids state taxes, therefore, the state in order to collect necessary funds for national demands is forced to increase taxes imposed on those who pay them. Some fail to pay taxes, others assume heavier tax burden. This creates unequal economic conditions for legal and illegal business and distorts conditions for fair competition. Theoretical study of contraband problem is linked to the problem of tax evasion and tax payment evasion problem in the article, it reveals stimuli for making decision not to pay taxes. The article submits information about the scope and structure of shadow economics in the country. Main part of contraband is goods subject to excise duty – alcohol, tobacco and fuel. One of the factors which influence contraband is a great difference in prices in Lithuania and neighbouring countries from which contraband comes. Main negative consequences of contraband: relative reduction of annual income of the government; common worsening of economic subordination which reduces ability of the government to adopt rational solutions and predict consequences of these solutions; insufficient accuracy in grant of the state social sponsorship as even those who earn large income from illegal activity may obtain it; residents and legal entities tend not to observe existing rules and failure to observe the rules may become a norm.
JEL classification: L860, F190.Keywords: shadow economics, taxes, contraband, excise duty, tax evasion.