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Several theories of taxation exist in public economics. Governments at all levels (national, regional and local) need to raise revenue from a variety of sources to finance public-sector expenditures .
An informal economy (informal sector or grey economy) [1] [2] is the part of any economy that is neither taxed nor monitored by any form of government. Although the informal sector makes up a significant portion of the economies in developing countries , it is sometimes stigmatized as troublesome and unmanageable.
In 2000, the income tax income of developed countries was 53.8% of total income, compared with 28.3% in developing countries. They believe that wages and other income of workers in the informal sector in developing countries are still free from tax collection. The same is true of the property tax situation.
Secondly, inefficient tax structure and weak fiscal capacity indicate the presence of tax evasion, a relationship that is further examined in the section below on the informal economy. Overall, favorable tax types are correlated to greater fiscal capacity because they impose fewer economic efficiency costs, but also encourage more efficient tax ...
Developing countries have an informal sector representing an average of around 40%, perhaps up to 60% in some. [74] Informal sectors feature many small informal traders who may not be efficient in bringing into the tax net since the cost of collection is high and revenue potential limited (although there are broader governance benefits).
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Optimal tax theory or the theory of optimal taxation is the study of designing and implementing a tax that maximises a social welfare function subject to economic constraints. [1] The social welfare function used is typically a function of individuals' utilities , most commonly some form of utilitarian function, so the tax system is chosen to ...
Hernando de Soto Polar (commonly known Hernando de Soto / d ə ˈ s oʊ t oʊ /; born June 2, 1941) is a Peruvian economist known for his work on the informal economy and on the importance of business and property rights.