UNDERGROUND ECONOMY AND THE TAX EVASION IN ROMANIA

The paper present the features of the underground economy in Romania and the factors’ contribution to its formation: undeclared labour of the formal sector (enterprises), value added tax evasion, and the under-reported incomes of the small entrepreneurs’ sector (family associations and self-employed). The tax evasion for the main budget revenues is estimated starting from the NIS - based valuations of the underground economy. Annual reduction of the undeclared labour with 10% - 15% could provide the necessary budget revenue for the implementation of fiscal relaxation measures, such as reducing the flat tax or the employers' security contribution.