ABSTRACT
At some stage many of us have discussed amongst friends and colleagues our view of the amount of income we forgo to the government in the form of taxes and the government’s use of these tax collections to fund public works. Typically the discussion results in a unanimous agreement that tax collections are excessive and could be better distributed amongst the various public works that the government has committed itself to providing. As one thing leads to another, tax evasion and avoidance become the topic of attention. If we are particularly unhappy with the government’s handling of the public purse, we may be more supportive of tax evasion and avoidance than we would be if we perceived the government was using public funds in an appropriate and efficient manner. Although these perceptions will turn out to be quite important in determining participation in the ‘underground economy’, it is necessary that we identify, at the outset, the distinction between tax evasion and avoidance. We will argue that tax evasion will form part of the underground economy and tax avoidance will not. Loosely defined, the underground economy may be interpreted aS unmeasured economic activity that has contributed to value, as defined by the national accounts, but goes unmeasured by society’s current measurement techniques. The underground economy has been variously described as illicit, cash, irregular, black, shadow, parallel, subterranean, dual, clandestine, gray, moonlight, submerged or hidden activities.
