The Second Economy and Tax Yield in Malawi

"This study has two main objectives. The first is to estimate the size of the underground or second economy in Malawi for the years 1965 to 1990. No attempt has previously been made to do this for the country’s entire second economy, hence there is no indication of its size or growth. Estimation of the size of the second economy is not an end in itself. The results of this exercise are then used to estimate the extent of tax evasion. The rationale for this is that tax evasion is usually associated with transactions and incomes that are not reported and which, therefore, are part of the second economy. Following from the first objective, the second main objective is to examine whether, and if so, how, the second economy can be taxed to reduce revenue losses incurred through the existence of the second economy."