2020
DOI: 10.13106/jafeb.2020.vol7.no5.073
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Effects of Foreign Direct Investment and Quality of Informal Institution on the Size of the Shadow Economy: Application to Vietnam

Abstract: Tax is the main revenue of Government, so fighting tax evasion and sustainable growth have been the primary macroeconomic goals being pursued by every developing country, Vietnam included. The existence and development of the shadow economic sector are synonymous with the national budget losing out. In Vietnam, foreign direct investment projects do not promote economic growth and is also a sector that gives way to tax evasion.The purpose of this study is to investigate the impact of foreign direct investment, … Show more

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Cited by 8 publications
(8 citation statements)
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“…The higher the tax rate is, the higher is the tax burden on the companies participating in the open economy and more and more people would be trying to take the eyes of the tax authorities away from their business by moving it into the shadow economy. Similar to FDIdespite all its insignificance in the article by the Vietnamese authors, the article by Ngoc (2020) shows that FDI can affect the volume of shadow economy negatively. Regression equation uses logarithm of total volume of FDIs and index of human capital per capita.…”
Section: Introductionmentioning
confidence: 73%
“…The higher the tax rate is, the higher is the tax burden on the companies participating in the open economy and more and more people would be trying to take the eyes of the tax authorities away from their business by moving it into the shadow economy. Similar to FDIdespite all its insignificance in the article by the Vietnamese authors, the article by Ngoc (2020) shows that FDI can affect the volume of shadow economy negatively. Regression equation uses logarithm of total volume of FDIs and index of human capital per capita.…”
Section: Introductionmentioning
confidence: 73%
“…However, the presence of informal sector composition in the labour market may deter institutional quality. Further, a stronger informal sector composition in the labour market may practice tax evasion and hinder the tax revenue of the government leading to being incapable to develop infrastructure, which also deters the quality of infrastructure though it is seen as a potential pulling factor of FDI (Hoang, 2020).…”
Section: Relationship Between Fdi and Informal Sectormentioning
confidence: 99%
“…There is a massive impact of FDI on the economic structure of the host country. The majority of administrators and economic researchers is believed that FDI leads to an increase in exports, rises in the level of living standards, less unemployment, improving the balance of payments, and provides some other welfares (Borensztein et al, 1998;Carkovic & Levine, 2002;Hussain & Haque, 2016;Ngoc, 2020). Alfaro et al (2004Alfaro et al ( , 2010 inspect the influences of multinational companies on the host country.…”
Section: The Interaction Between Foreign Direct Investment and Econommentioning
confidence: 99%