The Shadow Economies of the Asia-Pacific

Abstract. Despite continuous government attempts to increase taxpayer compliance, the shadow economy continues to offer a way for taxpayers to evade their taxpaying obligations. The consequences are clear: policy‐makers have increasingly imperfect knowledge about the state of economic affairs as shadow economy activity expands. We provide the first known estimates of the shadow economy for 17 Asia‐Pacific countries. We show that, not only have these activities grown over the last ten years, but countries with relatively thin taxpayer compliance initiatives experience the greatest shadow economy activity.