ANALYSIS
Leaky Bucket Policies
Unintentionally
Encourage the Grey
Economy
Author: Emil Shurkov, MSc. Analyst, Center for Research and Policy Making (CRPM), Skopje
Policy-making is the decision to do or not to do something. In both cases governments enter a delicate game
of managing socio-economic incentives that encourage
or discourage certain behaviors. In terms of grey economy, governments take or do not take actions to maximize returns (i.e., increased budget revenues) through
social security contributions or taxes. Governments can
and do decrease the grey economy. However, actions
that are not based on sound, evidence-based policies can often cause unintentional effects that actually
increase incentives for the grey economy; such situations create a “Leaky Bucket” policy.
Figure 1 - Main problems for businesses in Macedonia (in %) (Q. C8) Source: CRPM/
CSD hidden economy business survey 2014)
12.9
Company registration procedures
85.7
21.4
Foreign currency regulations
Requests for documentation
31.5
Corruption in the client-supplier chain
31.5
Tax system
31.9
50
62.9
48.5
65.2
34.3
Labour legislation
55.7
35.7
Laws related to land ownership
44.3
40
38.6
40
Judiciary
Availability of credits for business financing
Crime, thefts
State business development stimulations
31.4
52.8
44.3
47.2
44.3
47.1
License issuing procedures
37.1
Political situation
38.2
Corruption of administration
32.9
Macroeconomic situation
Issue 48
60
84.2
14.2
0
10 Winter 2016
54.2
30
Unfair competition
medium or big problem
50
10
20
30
40
50
60
not a problem/insignificant problem
70
80
90
While Macedonia trys to
step up its efforts to tackle
the grey economy, it is not
immune to “Leaky Bucket”
policies such as legal
unpredictability, which
reduces co \X[