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The buyer pays the tax to the gross revenue, however cannot subtract expenses on
The intermediate goods bought from shadow suppliers. It puts it in
Rather unprofitable position.
The general tax from sales, hence, induces it to work in two
Extreme points of production: first, at the closing stages,
Where the added cost makes the most part of the general retail price. It
Gives the chance to leave from the tax just when it becomes the greatest.
Secondly, - at the initial stages when it is easy to evade from tax payment on
The added cost (cultivation of agricultural crops, manufacture
Brick, granting of services in-home etc.). It, thus,
Are excluded from it areas of manufacture of the intermediate blessings partly because of
Actions of tax system. Perhaps, the greatest costs here
There is that the tax system interferes with productivity growth
Than it is necessary to pay for absence of the good law
Having found out that shadow position generates costs, we have asked a question:
Whether elimination of these costs suffices to make of shadow sector
Best of the possible worlds? Further we were convinced, what is it not so. It
Suffer not only from the extralegality, but also from absence the legal
Systems which would protect economic activities. Differently, they
Suffer from absence of the good law.
When owners of underground factories use the best efforts to avoid
Detection when inhabitants of extralegal settlements spend time and forces on
Protection of the property and on performance of procedures on its legalisation, when
Street dealers cannot offer comprehensible guarantees under financing
Market or purchase on credit buildings, it means that they do not have rights
Properties which could be used as maintenance of contracts.
And such rights are necessary for the effective organisation economic
Activity. The society as a whole also suffers from negative consequences
Extralegal activity from what follows that at us is absent
Good laws should provide these three elements: the property rights,
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