Published September 2025 | Version v1
Journal article Open

Fiscal Strategies to Tackle the Shadow Economy: A Literature Review

Authors/Creators

  • 1. ROR icon Ministry of Finance

Description

The shadow economy is a significant challenge in fiscal policy management, especially in developing countries such as Indonesia. This unrecorded economic activity leads to lost tax revenue potential and disrupts the effectiveness of economic policy. This study aims to evaluate fiscal strategies that can be used to reach and tax activities in the shadow economy sector with a circulation-based approach. The method used is a literature study of more than 20 international journals and institutional reports, with SWOT analysis techniques to assess the strengths, weaknesses, opportunities, and threats of the reviewed policies. The results show that the monetary approach, particularly the Currency Demand Approach and the MIMIC Model, is effective as an indirect indicator to estimate the size of the shadow economy. Fiscal strategies such as presumptive taxation, digital payment system integration (such as QRIS), and data estimation-based tax intensification are considered complementary and have the potential to broaden the tax base. International case studies from Germany, India, and Turkey emphasise the importance of synergies between fiscal reform, digital transformation, and strong governance. The findings provide a basis for developing more adaptive, inclusive, and data-driven fiscal policies in Indonesia.

Files

3417-Article Text-17031-1-10-20251118.pdf

Files (435.8 kB)

Name Size Download all
md5:79aa730a2af0ef14963877340230da4b
435.8 kB Preview Download

Additional details

Dates

Issued
2025-09-29

Software

Repository URL
https://jurnal.pknstan.ac.id/index.php/pkn/article/view/3417
Development Status
Active

References

  • Adrinata, R. (2024). Mengatasi Shadow Economy Melalui Kebijakan Perpajakan yang Progresif. https://opini.kemenkeu.go.id/article/read/mengatasi-shadow-economy-melaluikebijakan-perpajakan-yang-progresif
  • Al-Firdaus, F. (2023). Indonesian tax reforms policy alternatives for handling shadow economy. Info Artha. https://doi.org/10.31092/jia.v7i1.1977
  • Alm, J., & Martinez-Vazquez, J. (2007). Measuring the informal economy in Latin America and the Caribbean
  • Aman-Rana, S., Minaudier, C., & Sukhtankar, S. (2023). Informal Fiscal Systems in Developing Countries. Social Science Research Network. https://doi.org/10.3386/w31793
  • Amin, R. (2014). Estimating Indonesia's Non-Observed Economy using the MIMIC model. Hitotsubashi University.
  • Arifbillah, K., Santoso, R. A., Yolanda, V., & Wijaya, S. (2023). Urgensi Penerapan Windfall Profit Tax Atas Komoditas Batu Bara Di Indonesia. Educoretax, 3(1), 56–71. https://doi.org/10.54957/educoretax.v3i1.374
  • Asian Development Bank. (2022). The informal sector and informal employment in Indonesia.
  • Awasthi, R., & Engelschalk, M. (2018). Taxation and the shadow economy : how the tax system can stimulate and enforce the formalization of business activities. World Bank, Washington, DC. https://doi.org/10.1596/1813-9450-8391
  • Bank Indonesia. (2019). Quick Response Code Indonesian Standard (QRIS) Implementation. https://www.bi.go.id/en/edukasi/quick-response-code-indonesian-standard/
  • Bank Indonesia. (2023). Laporan Penggunaan QRIS di Indonesia.
  • Bird, R. M., & Wallace, S. (2003). Is it really so hard to tax the hard-to-tax? The context and role of presumptive taxes. In International Tax Program Paper
  • Blanchard, O. (2017). Macroeconomics (7th ed.). Pearson
  • BPS. (2023). Proporsi Lapangan Kerja Informal Menurut Jenis Kel. https://www.bps.go.id/id/statistics-table/2/MjE1NSMy/proporsi-lapangan-kerja-informal-menurut-jenis-kelamin.html
  • Buehn, A., & Schneider, F. (2012). Shadow economies around the world: novel insights, accepted knowledge, and new estimates. International Tax and Public Finance, 19(1), 139–171. https://doi.org/10.1007/s10797-011-9187-7
  • Cagan, P. (1958). The demand for currency relative to the total money supply. Journal of Political Economy, 66(4), 303–328.
  • Chakraborty, P., & Krishnankutty, M. (2017). Demonetization and the Informal Economy in India
  • Dell'Anno, R. (2007). The shadow economy in Portugal: An analysis with the MIMIC approach. Journal of Applied Economics, 10(2), 253–277.
  • Dewi, S. R., & Nasution, A. (2022). Estimasi ukuran shadow economy dan implikasinya terhadap kebijakan fiskal di Indonesia. In Buletin Ekonomi Moneter dan Perbankan
  • DJP. (2020). Pajak Penghasilan Final bagi UMKM: Kebijakan dan Implementasi
  • DJP. (2022). Laporan Tahunan dan Strategi Kepatuhan Pajak Berbasis Data.
  • Elgin, C., & Oztunali, O. (2012). Shadow economies around the world: Model based estimates
  • Feige, E. L. (1990). Defining and estimating underground and informal economies: The new institutional economics approach. World Development, 18(7), 989–1002
  • Gërxhani, K. (2004). The Informal Sector in Developed and Less Developed Countries: A Literature Survey. Public Choice, 120(3/4), 267–300. https://doi.org/10.1023/B:PUCH.0000044287.88147.5e
  • Gnangnon, S. K. (2023). Effect of the Shadow Economy on Tax Reform in Developing Countries. Economies, 11(3), 96. https://doi.org/10.3390/economies11030096
  • Gokcekus, O., Bağirzade, E., & Scribner, D. (2023). The Shadow Economy and Corruption in ECO Countries. Sosyoekonomi Journal. https://doi.org/10.17233/sosyoekonomi.2023.04.09
  • Hapsari, I. M., Yu, S., Pape, U. J., & Mansour, W. (2023). Informality in Indonesia: Levels, Trends, and Features. https://doi.org/10.1596/1813-9450-10586
  • Helms, M. M. (2006). Swot analysis. In In Encyclopedia of Management (6th ed., pp. 892–894). Gale.
  • IMF. (2019). Enhancing the Effectiveness of External Support in Building Tax Capacity in Developing Countries.
  • Iskandar, A., & Mulyawan, A. W. (2017). Analisis Underground Economy Indonesia dan Potensi Penerimaan Pajak (Analysis of Underground Economy of Indonesia and Tax Revenue Potential). Social Science Research Network. https://doi.org/10.2139/SSRN.3004254
  • Joshi, A., Prichard, W., & Heady, C. (2014). Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research. The Journal of Development Studies, 50(10), 1325–1347. https://doi.org/10.1080/00220388.2014.940910
  • Marhamah, Z. (2020). How are the Underground Economy Levels in Indonesia. 273–278. https://doi.org/10.2991/AEBMR.K.210311.054
  • Medina, L., & Schneider, F. (2018). Shadow Economies Around the World: What Did We Learn Over the Last 20 Years? IMF Working Papers, 18(17), 1. https://doi.org/10.5089/9781484338636.001
  • Mishkin, F. S. (2019). The Economics of Money, Banking, and Financial Markets (11th ed.). Pearson
  • Miura, S. (2014). Money Circulation Equation Considering Time Irreversibility. 04(4), 187–200. https://doi.org/10.4236/ALAMT.2014.44016
  • Mpofu, F. Y. S. (2021). Informal Sector Taxation and Enforcement in African Countries: How plausible and achievable are the motives behind? A Critical Literature Review. 4(1),72–97. https://doi.org/10.1515/OPENEC-2020-0114
  • OECD. (2017). Shining light on the shadow economy: Opportunities and threats.
  • Panjaitan, M. R., & Yuna, Y. (2024). Pengaruh Coretax terhadap Transparansi dan Akuntabilitas Sistem Perpajakan. Jurnal Riset Akuntansi, 2(4), 51–60. https://doi.org/10.54066/jura-itb.v2i4.2560
  • Schneider, F. (2005). Shadow economies around the world: what do we really know? European Journal of Political Economy, 21(3), 598–642. https://doi.org/10.1016/j.ejpoleco.2004.10.002
  • Schneider, F., & Buehn, A. (2016). Estimating the size of the shadow economy: Methods, problems and open questions.
  • Schneider, F., Buehn, A., & Montenegro, C. E. (2010). Shadow economies all over the world : new estimates for 162 countries from 1999 to 2007. Edward Elgar Publishing. https://doi.org/10.1596/1813-9450-5356
  • Schneider, F., & Enste, D. H. (2000a). Shadow Economies: Size, Causes, and Consequences. Journal of Economic Literature, 38(1), 77–114. https://doi.org/10.1257/jel.38.1.77
  • Schneider, F., & Enste, D. H. (2000b). Shadow Economies: Size, Causes, and Consequences. Journal of Economic Literature, 38(1), 77–114. https://doi.org/10.1257/jel.38.1.77
  • Setiadi, A., & Syamsudin, S. (2020). Pendekatan estimasi ukuran ekonomi bayangan di Indonesia. Jurnal Ekonomi Dan Keuangan Indonesia, 68(3).
  • Slemrod, J., & Weber, C. (2012). Evidence of the invisible: Toward a credibility revolution in the empirical analysis of tax evasion and the informal economy. International Tax and Public Finance, 19(1), 25–53.
  • Smith, B. (2025). A Novel Digital Payment Architecture: A Unified Payment Interface and its Systematic Transformation of Financial Infrastructure. https://doi.org/10.20944/preprints202501.0289.v1
  • Tano, I. (2024). Digitalization in local governance. https://doi.org/10.69651/pijhss030317
  • Tanzi, V. (1983). The Underground Economy in the United States: Annual Estimates, 1930-80 (L'economie clandestine aux Etats-Unis: estimations annuelles, 1930-80) (La "economia subterranea" de Estados Unidos: Estimaciones anuales, 1930-80). Staff Papers - International Monetary Fund, 30(2), 283. https://doi.org/10.2307/3867001
  • Tanzi, V. (1999). Uses and Abuses of Estimates of the Underground Economy. The Economic Journal, 109(456), 338–347. https://doi.org/10.1111/1468-0297.00437
  • Torgler, B., & Schneider, F. (2009). The impact of tax morale and institutional quality on the shadow economy. Journal of Economic Psychology, 30(2), 228–245. https://doi.org/10.1016/j.joep.2008.08.004
  • Utama, W. P. (2017). Reformasi fiskal dan tantangan shadow economy di negara berkembang. Jurnal Administrasi Dan Kebijakan Publik.
  • Venkataraman, R., & Kundu, S. G. (2016). Preventing Tax Evasion of the Commercial Tax Departments through Statistical Models. Adarsh Journal of Management Research, 9(2), 13–18. https://doi.org/10.21095/AJMR/2016/V9/I2/108449
  • World Bank. (2020). Global Economic Prospects: Slow Growth, Policy Challenges.
  • World Bank. (2025). World Bank Open Data. https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?locations=ID
  • Zulkhibri, M., & Ghazali, A. H. (2015). Informal economy in ASEAN: Size, causes and policy responses. Asian Economic Journal