Reducing costs and enhancing benefits of formality: From the Firm's Perspective

Elizabeth Ruppert Bulmer, Arvo Kuddo and Michael Weber

No 28060667, Jobs Group Papers, Notes, and Guides from The World Bank

Abstract: The high incidence of informality in developing countries acts as a drag on economic development due to the associated efficiency and equity costs and implied weak governance. Policy makers therefore want to reduce informality. This note presents guidance on policy levers to make formality more attractive and informality less attractive from the perspective of small, medium and large firms, and from the perspective of micro-entrepreneurs. It elaborates the challenges for shifting incentives in favor of being formal and employing workers on formal contracts rather than operating under the regulatory radar, and presents a range of policy options.

Keywords: reduction in marginal tax rates; corruption in tax administration; active labor market policy; Active Labor Market Policies; marginal effective tax rate; tax wedge on labor; social security contribution rate; per capita income level; small and medium size enterprise; Occupational health and safety; public information campaign; social insurance contribution; corporate income tax; labor demand elasticity; social security agency; cost of compliance; compliance with law; bank of england; privileges and immunity; social security coverage; taxpayer id number; social insurance program; degree of informality; minimum wage law; private sector productivity; sources of innovation; education and health; Rule of Law; individual income tax; high tax burden; informal labor market; indirect labor cost; average monthly wage; social insurance scheme; high tax rate; personal income tax; regular income tax; unpaid family worker; lump sum tax; filing of tax; business license fee; Social Security Records; institutional capacity building; limited administrative capacity; average monthly salary; total labor force; labor tax burden; policy and institution; law and regulation; social insurance benefit; net income year; cost of labor; increasing tax revenue; community outreach program; taxes and labour; types of taxation; labour market reform; workers with disability; access to skill; opportunities for corruption; protection can; tax rate cut; healthy working conditions; special tax treatment; freedom of association; tax on income; core labor standard; labor market regulation; labor taxes; payroll tax; employer contribution; formal employment; profit tax; shadow economy; Informal Economy; formal sector; informal firms; labor inspection; informal sector; business environment; informal worker; consumption tax; tax reporting; social contribution; tax liability; tax base; enforcement capacity; regulatory requirement; tax rule; unemployment insurance; Tax Compliance; firm size; government effort; annual revenue; sick leave; worker protection; labor regulation; Job Creation; Tax Reform; labor inspector; Vocational Training; government regulation; Business Climate; firm growth; Property tax; Learning and Innovation Credit; taxpayer registration; voluntary exit; tax return; tax authorities; contribution payment; labor protection; transition countries; tax obligation; tax inspectorate; unemployment rate; average wage; industrial country; transition country; tax authority; unfair competition; informal employment; public good; human capital; productivity gap; labor input; Health Regulation; minimum level; tax relief; formal contracts; policy option; minimum contribution; advanced economy; standard deviation; empirical study; intended beneficiary; aggregate employment; safety rule; alternative financing; informal business; employment outcome; excise tax; wealth tax; occupational illness; employment effect; registration fee; positive relationship; negative effect; empirical evidence; redistributive policy; tax levy; net wage; tax from october; cost burden; wage earnings; incentive regime; pension contribution; payroll deduction; tax contribution; regulation policy; pension benefit; risk pool; pension coverage; legal coverage; irregular income; maximum income; employer premium; mining activity; cultures of differences; pension insurance; labour economics; employee share; designing policy; tax effect; fiscal balance; research department; field experiment; labor productivity; taxable income; total employment; lump-sum tax; income threshold; flat tax; single tax; accounting method; family labor; administrative procedure; regulatory environment; registration information; employment pattern; accounting staff; nominal wage; federal tax; administrative criterion; additional revenue; natural person; gross revenue; global economics; firm performance; marginal rate; presumptive tax; intermediate rate; judicial system; workers' rights; small farmer; competition policy; infrastructure network; complementary factor; tax enforcement; information gap; property right; effective policies; vicious cycle; enterprise survey; official corruption; government scrutiny; average productivity (search for similar items in EconPapers)
Pages: 33
Date: 2017-10-01
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