Abstract:

The article dedicated to expand the meaning of the shadow economy. The shadow economy is one of the biggest challenges to the any economy, because it has consequences in terms of tax evasion, labor market distortion, unfair competition, and inefficient allocation of resources. In the market economy conditions, the shadow economy became one of the survival part. The shadow economy is closely interwoven with the legal and real sector of the economy and is an integral part of it. In its activities, it also uses the services of the state, its material and social factors, labor power, etc. The article describes the theoretical aspects of the shadow economy, such as the classification forms by activity, the main features, describes the ways of avoiding taxation and give definitions to the forms of shadow activity, describes the groups of shadow economy, shows the examples of undeclared work and its features. The article shows the subjects of illegal activities in the frame of the pyramid conception. Any activity in the frame of the shadow economy is criminal, but not every falls under the norms of the existing legislation. Of course, it also shows advantages and disadvantages of illegal activity, like identifies three positive functions of the shadow economy in the market economy, negative effects on a whole country. The article analysis the current state and dynamics of the shadow economy in developed countries, the main reasons of existing shadow activity in countries, shows statistic data from 2003-2016.