Understanding the Philippine underground economy

• Main Authors: Dadios, Alexa Isabelle A., Flores, Dahlia Mae T., Lim, Blessie E.
• Format: text
• Language: English
• Published: Animo Repository 2007
• Subjects: Informal sector (Economics) > Philippines; Tax evasion > Philippines; Economics
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/10799
• Institution: De La Salle University

This study estimates the size of the Philippine underground economy, in terms of the Gross Domestic Product, with the use of the currency demand method. An empirical model estimates the currency demand of the total Philippine economy was constructed through adapting the currency demand equation by Tanzi, and implementing it with the given Philippine data, covering the period from 1970 to 2005. The model was run using ordinary least squares regression to obtain the appropriate estimates, which ranged from 29.6 percent to 68.8 percent of the Philippine GDP. And with these underground economy estimates, the effects of different taxes on its size and trend were analyzed per political period. Moreover, the combinations of the variables were analyzed as to how they specifically influence the underground economy. Lastly, policy simulations were done to replicate the effects of the changes on the tax mix and tax burden.