7/29/2019 Parallel Economy (Black Money)

1/7

7/29/2019 Parallel Economy (Black Money)

2/7

WHAT IS A PARALLEL ECONOMY?

Feige: the hidden/parallel economy includesthose activities that go unreported or areunmeasured by the societys current techniques

for monitoring economic activity.

Scneider & Enste: parallel economy

includes all unregistered economic activitieswhich contribute to the officially calculatedGNP (Gross National Product).

7/29/2019 Parallel Economy (Black Money)

3/7

Simply put, parallel economy often could be demonstrated ashidden economy of a country. People or business entities whendo not show their exact income as per government rules theincome comes under parallel economy.

as hidden economy of a country. People or business entitieswhen do not show their exact income as per government rulesthe income comes under parallel economy.

Simply put, parallel economy often could be demonstratedas hidden economy of a country. People or business entities

when do not show their exact income as per governmentrules the income comes under parallel economy.

Simply put, parallel economy often could be demonstrated as

hidden economy of a country. People or business entities

when do not show their exact income as per governmentrules the income comes under parallel economy.

The informal economy includes unreported income from

the production of legal goods and services, either from

monetary or barter transactions - hence all economicactivities which would generally be taxable were they

reported to the state (tax) authorities. In general, a precise

definition seems quite difficult as the informal economy

develops all the time and adjusts to changes in taxes,sanctions from the tax authorities and to general moral

attitudes.

7/29/2019 Parallel Economy (Black Money)

4/7

Parallel economy exists due to various reasons and

they are as follows:

High tax rates implemented by the government.Complicated tax paying procedures and policies.

People believe that their money is not going to be

properly utilized by government as their trust on

government is less.

High inflation which puts tax payers under high tax

paying brackets.

People do not get enough return on their paid taxes.Involvement of government agencies and officials

in corrupt practices.

Insufficient laws and their implementation to

counter such activities.

7/29/2019 Parallel Economy (Black Money)

5/7

7/29/2019 Parallel Economy (Black Money)

6/7

COMPONENTS OF A BLACK MARKET

ECONOMY

BLACK

ECONOMY

ARMS &AMMUNITION

CORRUPTION &

BRIBERY

DRUGS, ALCOHOL

& TOBACCO

COPYRIGHTED

MEDIA

CURRENCY

EXCHANGE

HAWALA

SWISS BANKACCOUNTS

7/29/2019 Parallel Economy (Black Money)

7/7

Main cause of parallel economy