Russia's untaxed shadow economy is expanding

Subject

Russia's burgeoning grey economy.

Significance

Russia's grey economy accounts for one-fifth of GDP and employs one-fifth of the workforce, according to official statistics, and the trend is upwards. The sector sometimes overlaps with crime but often plugs gaps in retail and services which the official economy and state provision cannot fill, and offers people a chance to boost meagre incomes. The urge to avoid taxation seen as excessive narrows the base of honest taxpayers, forcing government to impose higher levies on them.

Impacts

• The social security system will come under more strain from low tax payment, an ageing population and a poor savings culture.
• The increase in the pensionable age is likely to boost informal employment.
• Freelance consultants and other professionals, often working remotely, will boost white-collar informal employment.