Evaluation of the determinants of shadow economy in selected central Asian countries

Abstract

This paper focuses on the evaluation of the determinants of the shadow economy in Kazakhstan, Kyrgyz Republic and Tajikistan from 2005 to 2015. Our empirical research shows that determinants can explain more than 80 percent of the scope of the shadow economy in these countries like total labor force, tax rate as a percent of commercial profit, labour participation rate, GDP per capita, imported goods and services as a percent of GDP. The high rate of taxes and total labour force has a positive impact on the scope of the shadow economy because firms evade the taxes pay salaries in "envelopes".