AT Kearney found there was a correlation between the coverage of electronic payments in a country and its shadow economy. Countries with high levels of electronic payment usage, such as the UK and the Netherlands, have smaller shadow economies than those with a minimal level of electronic payments, like Bulgaria and Romania, writes AT Kearney's report. Several countries have come up with measures to increase the use of electronic payments, which would reduce the underreporting, for example: providing VAT reductions for card payments, funding new electronic terminals, limiting cash payments in certain sectors, or offering incentives for using cards. The unreported economy can be divided into undeclared work, which accounts for two thirds, and underreporting, where companies only report part of their income in order to evade tax.
Corina Saceanu