Emerging from the shadows, the shadow economy to 2025 provides a comprehensive examination of the global SE. The report is divided into four sections: SE forecasts for 28 countries to 2025, key factors shaping the SE, the impact and management of the shadow economy and finally recommendations for the accountancy profession.
The shadow economy (SE) is expected to decline globally by 2025, from 23% of global GDP in 2011 to an estimated 21% in 2025, on the basis of a mathematical analysis of the factors behind the SE. But the decline is not uniform, and a number of countries, particularly emerging market economies, are expected to experience an increase in the SE as a percentage of GDP by 2025.
Opinion was split on where responsibility lies for tackling the SE; 76% said it lies with governments, while 60% believed that it is up to individuals to refrain from and report shadow activity, and 45% wanted local communities to combat it.
The impact of a number of potential future factors of SE:
Business: increasing pressure on small business survival, intense market competition and the rise of the independent worker were seen as key factors of SE growth.
Socio-demographic and socio-environmental: rising unemployment, increasing poverty and limited access to education and training, along with increasing levels of corruption, a lack of ‘guilty conscience’ and a low risk of detection were suggested as being the top factors.
Governance: regulation detached from the lives of ordinary people was cited as a significant factor, along with declining government expenditure and increasing levels of regulation.
Science and technology: could both slow SE growth and enhance it, depending on how these developments are used. The emergence of the ‘maker economy’, where individuals make their own products or redesign others, for their own businesses, could increase SE activity. Equally, increasing adoption of digital currencies could create further opportunities for the SE, though some argue that use of these currencies could be used as part of a monitoring system.
The accountancy profession add higher levels of service through:
- Look (monitoring)
- Shape (policy advisory)
- Count (measurement and modelling)
- Resolve (mediation)
- Automate (technology)
- Inform (education).