A study on tax evasion and shadow economy: causes and effects

Tax and tax evasion are two faces of the same coin. Since centuries evasion has been a part of every society, however in this 21st century the size and extent of evasion is taking a gigantic shape especially because of corruption which has spread like a cancer in all walks of life. Tax evasion is corroding the GDP of the country and its foundation has become deep-rooted in the Indian soil. Today the quantum of black economy in India is around half the size of GDP of India. Evasion has deep-rooted impact on the downtrodden and weaker section which culminates other social evils in the society. The purpose of this paper is to understand the concept and relationship of tax evasion and black economy in the Indian perspective. We have also tried to find out the effects of rising tax evasion and finally the ways by which we can reduce evasion in India. The paper uses secondary sources of data by which we try to deduce conclusions and recommend the measures to reduce the size of shadow economy in India.