Aleksa's Book Review: The Underground Economies

in tax •  21 days ago

When I was younger, I had illusions of working as an offshore banker or money genius that would help people move lots of money, quickly and securely. After realising the amount of mathematics and bureaucracy associated with such professions, I'd decided to go a different route. However, the spark remains, and this book is the latest in my outflows of interest toward this exotic topic.

This book explains that there are several sorts of revenue in the economy of a nation: taxable and non-taxable. Taxable is then split into taxed and un-taxed. Non-taxable is split into legally and practically non-taxable. Taxed income is self-explanatory, and un-taxed is the stuff that's left over when the government takes its share. Non-taxable is more interesting to me: whereas bartering a cow for a tractor is practically non-taxable, I chose to focus on the legally non-taxable, such as gifts.

Of course, the book also mentions first and second-order underground economies of the black and grey market type. Soviet Russia and the rationing-era USA are given as examples, as well as (funnily enough) the Yugoslav hyperinflation markets. The book is definitely a fascinating look at how people adapt against government fiat in the economy, and how utterly fruitless a lot of such decrees are.

This is by no means a book that will turn you into a Gordon Gekko level financial wiz, assuming that's what you even want to be. Here you'll learn about the length people will go to in order to not get stolen from, and I think that 's a wonderful thing. However, when it comes to designing a voluntary tax system that effectively solves the underground economy problem, the book falls flat - the answers to which I'll have to find elsewhere.

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