The shadow economy in lithuania, its factors and reduction options

The shadow economy in Lithuania, its factors and reduction options Thesis includes: 6 tables, 16 pictures, 87 references, 67 pages. Thesis aim: To estimate Lithuanian shadow economy’s factors and to analyze its reduction options, considering Lithuania’s economic, political, tax and social structure and other factors. Thesis objectives: 1) to point out concepts and definitions of shadow economy, to form the ones to use in the thesis; 2) to analyze reasons and its impact to shadow economy; 3) to investigate the consequences of shadow economy; 4) to analyze possible restrictions of shadow economy, based on scientifical articles; 5) to investigate researches and its results about smuggling and illegal trade of excise goods, about illegal work or illegal wage, about trade of illegal goods and services; 6) to calculate the statistical link between factors of shadow economy and the size of shadow economy, based on regression analysis; 7) according the opinion of experts, to find out the most effective reduction options for shadow economy in Lithuania; 8) to summarize thesis research’s results, to make conclusions and suggestions; The methods of thesis research: analysis and synthesis of economic researches, regression analysis, expert evaluation. Results of the research and main conclusions: regression analyzis showed different results when size of the shadow economy was chosen from different sources (Lithuanian free market institute, Department of Statistics or Schneider researches). Some of regression equations are economically illogical. But significant statistical link was found between the size of shadow economy and excise for alcohol and cigarettes, net and gross average wage ratio, unemployment rate, low education level, cash and deposit ratio. Because of disparity in statistical information shadow economy should be analyzed further by its experts. And according to experts (average evaluation) shadow economy in Lithuania should be mainly reduced by reducing the taxes for citizens, by reducing corruption in the country and by increasing the tax morale. However these reduction options may be hard to implement due to the fact that Lithuania’s budged mostly depends on tax income, corruption is tried to be managed year by year with different laws and restrictions, however it is hard to avoid human factor. And tax moral (by improving government and citizens relations) is hard to be implemented due to the fact that each time new government are elected, they change the previous government’s strategy and suggest their own new one. To sum up, the results of this research could be used by the institutions which fight against shadow economy and make economic policy decisions. Better decisions could be made and more effective shadow economy reduction options could be chosen according to expert opinion analysed in this thesis. Applicability for publication. All thesis or separate parts of it could be applied for publication in journals of science, economics, business, etc. The results of the research could be presented in economic forums while discussing about Lithuania’s economy or business environment issues and solution options