Tax and Informality
About half of the global labour force operates within the informal economy. It’s commonly assumed they don’t pay any taxes – but this is a misconception. Many make formal payments to various state actors. Households and businesses in low-income countries also often contribute substantially to financing public goods and services through informal taxation. Without understanding these realities, states risk over-taxing some of their most vulnerable communities. It’s thus important that research explores how informal tax burdens are distributed and how taxing the informal economy affects equity, development and state building.