THE SIZE OF UNDERGROUND ECONOMY AND TAX GAP IN INDONESIA: PERIODE 1970-2010

RAHMAN, RIZKY AULIA,

2014 | Tesis | S2 Economics

This paper presents an estimation of the size of the underground economy in Indonesia during the period 1970-2010 using the currency demand approach. The findings indicate a small underground economy, 17.5% during the observation period. After the financial crisis in 1998, the size of the underground economy increased to around 20 %. The resulting tax gap is also calculated. The implied average tax gap can be separated into two periods where the first, 1970- 2000, has lower tax gap on average, 1.4 percent over official GDP and the second 1970-2000 2001-2010 has higher tax gap, 2.37 percent over official GDP.

Kata Kunci : underground economy, currency demand approach, financial crisis, tax gap, GDP