The underground economy in Colombia generates tax evasion

The underground economy refers to the economic activities that are carried out illegally in a country, those that seek at all costs the payment of taxes, contributions to social security to the laws or other labor laws and other related costs that is to say that no They comply with what is stipulated by the Government, it also receives the name of shadow economy, black market or simply informal economy.

The measurement of this type of economy is complex due to its non -generation of tax payment, its appearance is zero, however, it is identified when measuring the gross domestic product of the country, observing the demand for money and the informal market of worked; While the money from a transaction obtained by these illegal means will not appear in statistics, but this money will appear in the expenses when used in a legal transaction. This type of economy is not totally freed, since it is only displayed at the time of problem in liquidity.

The trade of stolen goods is part of this economy, that is, the purchase and commercialization of these; The evasion of taxes, and the statistics generated by the circulation of money affects the economy since it leads to inflation, it should be noted that this depends if it occurs in a developed country or in an underdeveloped one such as ours is.

A business, without negative intentions such as a meter sales position, for the simple fact of not being registered with the Chamber and Commerce, is already part of the underground economy, a policeman who accepts bribes, a person who works, but be undocumented, artisans who wish to profit from concerts or simply "street art" would also be part of this economy.

This economy could damage the performance of the legal economy, according to Emilio Sardi in the newspaper El Heraldo “if the dimensions of the underground economy are not recognized in our country, economic policies that do not contribute to the competitiveness of the responsible legal sectors will not be designed of real growth ”which refers to trying to seek solutions to the country’s problem.

In 2012, an increase in informality was identified taking as a reference the illegality and formality, this assert was three percentage points compared to the initial estimate of the gross domestic product of that same year although in our country, the causes of The underground economy is easily identified by ligating labor informality, the tax evasion observed in the indicators of evasion to the DIAN and the illegality. (Economia, 2018)

This essay was developed in order to deepen the issue of the underground economy, since it is of great interest to the country’s economic sector, although it is strongly linked to unemployment indices, its causes were identified, the index of the index of Informal employment through which the consequences are passed through and how the sectors that intervene and influence this type of economy are currently being presented.

In Latin America it is where this phenomenon has most been identified, unemployment, so it is advisable.

The informal economy plus the illegal economy is those who make it Of this type circulating, this figure moves without appearing in statistics for tax purposes, nor to contribute to social security. (Gómez, 2007)

The strategies that have been implemented over the years in our country have been ineffective for almost half of the employed population is in informal work, the entire structure is especially weakened that is intended for basic public services and to what It is intended for the payment of pensions.

The various forms of underground economy do not contribute any benefit, on the contrary, the existing problems increase and create others, with high costs that affect the entire society, it is also one of the main sources of inequality because it offers profitability to a small part of the population and does not take into account the difficulty of other people to access a formal job, an example of this would be the people who inhabit the rural area.

After the tax reform, the percentage of informal workers increased, bringing with it the big problem for the country, in which we are currently, that is why we are interested in investigating the issue, and thus expose in a clear and concise way everything which gives the underground economy. It is necessary without a doubt to emphasize the measures that have been implemented to minimize this problem and examine why they have not worked.

The underground economy is known as the illegal sale of products, goods or services violating the insertion of the price established by the Government or by companies. This economy is constituted by criminal activities such as drug trafficking, organ trafficking, prostitution, games of chance, money laundering and crimes of violence, in order to evade taxes, contributions to social security, laws and laws labor and costs related to activities regulations.

Underground economic activity is developed in countries that have vulnerable and high regulation institutions. According to the World Competitiveness Report of the World Economic Forum (2018) “Colombia is plunged under regulations that produced 1.323 laws, 17.000 decrees and 69.000 resolutions between 2000 and 2016, therefore, this has placed Colombia in 123th between 137 countries as a country that contains excess government regulations ”.

Apart from being a matter of public order, the underground economy produces general damage to the country’s economy, it has a great reach in Colombia due to the economy of drug trafficking and illegal economy, before the spread of these activities, the underground economy Colombian focused on the smuggling of imports, export of livestock, emeralds and coffee.

"The expansion of drug trafficking occurred in the 1970s and eighties with the production and marketing of cocaine causing a decrease in marijuana consumption, which leads to a transformation of the Colombian economy and society" (Thoumi, 1994).

Colombian cocaine production step on being a production based on coca paste, to be done with locally cultivated coca. The large -scale drug trafficking operation substantially increased the profits and led to the formation of the so -called "posters" of Medellín, Cali and the coast. In the same way, the necessary mechanisms and processes for money laundering were created (Diaz and Sánchez, 2004).

Subsequently, other countries strive to have an accounting registration of informality since they can make decisions creating policies for good growth control of illegality. In the European Union, the guideline entered into force so that the members of the State include in the calculation of GDP activities such as prostitution, drug trafficking and smuggling of alcohol and cigarettes, but this is not the case of Colombia since in 2016 Official economists were isolated for the publication of statistics corresponding to the underground economy and Colombians were increasingly affected by the implementation of confiscatory norms and the most recent tax reform.

The National Administrative Department of Statistics (DANE) revealed that by 2019 47.6% of citizens have an informal job, this means that 5.7 million Colombians obtain a monthly income for developing informal activities. The cities with the highest informality rate are Cúcuta (71.2%), Sincelejo (66%), Riohacha (61.7%), Santa Marta (61.3%) and Valledupar (59%).

During this year, it was identified that the underground economy moves 35% of GDP, it is indicated that it reached 304 billion pesos and the report delivered by the United States Drug Control Office announced the alarming growth In the cultivated area of ​​Coca, closing the year 2017 with a total of 207.000 hectares, thus estimating that this economic activity grows at the same rate as the total economy, driven by cash use.

As we know, informality moves large amounts of money and do not appear in official statistics for tax purposes including the evasion of taxes and businesses or businesses that are not registered in the Chamber of Commerce and do not make their contribution to Social Security. Labor informality reaches 64% of the economically active population.

Street trade is the best known informal activity showing the dimension of money that moves without registration, some experts evaluate that street sales businesses in the capital of Colombia (Bogotá) generates daily 1.900 million pesos. That is why in the country the official growth of the economy is poor, money circulates in informality and illegality by putting into play the formal economy, which is what generates quality employment.

The informal economy involves a great variety of implications, some of these are:

• Tax evasion, which leads to the state stopping receiving remuneration.
• Invasion of public space and vehicular congestion
• Increase in crime
• Pollution of public spaces

This economy has caused big problems, so much that the informal worker has moved to a low category without having anything in his favor. In addition, in relation to social form, informal activity does not protect insurance as:

• Death insurance
• The insurance against all risk
• Health insurance

This economic informality is outside the State since for the development of any country the payment of taxes for all citizens is important. There are three sectors where the informal economy is located, these are:

• Trade
• Agriculture
• Building

For these three types of economic development there is no element that causes the State to decrease this economy because government aid in trade is void, agriculture does not carry and does not increase taxes to the State and in construction it occurs Problem, workers do not contribute tax payment.

The balance for this economy is directly related to the social protection that the State provides to citizens, especially those who do not have a stable job, but this same has positioned itself before this economy unfairly since its laws go against Of this large multitude of citizens who make up the gray economy, according to Hugo Maul “the laws created to allegedly end this situation, what it really does is increase it, since the State does not do what it should do that is to help and be on the side of the Citizen if not, what is what he does is create laws to make citizens’ antipathy ”.

To achieve a decrease in this economy there are 8 agreements that were stipulated by the International Labor Organization (ILO) considered fundamental and includes principles and rights at work, these are:

1. Agreement on Freedom of Association and the Protection of the Right of Syndication, 1948
2. Agreement on the Right of Trade Union and Collective Sending, 1949
3. Agreement on forced labor, 1930
4. Agreement on the abolition of forced labor, 1957
5. Agreement on the minimum age, 1973
6. Agreement on the worst forms of child labor, 1999
7. Agreement on Remuneration Equality, 1951
8. Discrimination Agreement, 1958

One of the main problems that leads to being part of the informal economy is the creation of poorly paid jobs and without social or health benefits as established by law, this demotivates the worker and forces him to seek informal work as another source of income , all this is due to bad economic policies.

To conclude, Colombia must continue to take into account the underground economy in official statistics and not design more economic policies since these do not contribute to the competitiveness of legal sectors that are responsible for the growth of the real economy. Nor can consciousness in the State be created about excessive regulation, which generates the informal economy and stops the development of the country.

Over the years, the informal economy and poverty are on the rise, the State and the bank in general had to have resources provided at low interest in order to give family work and stability, this would serve to gradually end economic informality gradually , and all would have benefits, the State with the payment of taxes and families with their own resources, health insurance and a job with equitable remuneration, schedules and benefits stipulated by law.

A proposal and goal that is established on the presidential agenda to solve the underground economy is the implementation of tools to carry out a process of labor and business formalization together with a financial education for taxpayers.

References

1. Emilio Sardi (January 29,2019) El País.com.co https: // www.the country.com.CO/Opinion/Columnists/Emilio-Sardi/Economy-Subterranea-1.HTML
2. Economy Writing (June 27,2018) https: // elNuevosiglo.com.CO/ARTICLES/06-2018-ECONOMY-ILGAL-MUVE-EL-35-DEL-PIB
3. Martha Morales Manchego (June 11, 2017) The time https: // www.time.com/Economia/Sectors/Weight-of-the-Economy-Subterranea-in-Pib-De-Colombia-97638
4. EAN University (February 10, 2020) Portfolio, published in entrepreneurial thought http: // blogs.briefcase.CO/RUBBER-EMPREDER/2020/02/10/COLOMBIA-2020-A-ECONOMY-ENTRE-LUCES-Y-SAMPS/
5. International Labor Organization https: // www.ilo.Org/Global/Standards/Introduction-to-International-Labour-Standards/Conventions-And-Rencommendations/Lang-ES/Index.htm
6. Luis Guillermo Gómez Naranjo (April 18,2007) http: // www.Scielo.org.CO/SCIELO
7. Hernán Gonzales Rodríguez (July 12,2018) The spectator https: // www.the viewer.com/Opinion/Economy-Subterranea-in-Colombia-Columna-799869
8. Paola Ochoa (December 19,2004) Week, published in Economics https: // www.week.com/ECONOMY/ARTICLE/LA-ECONOMY-Subterranea/70009