Category: Economics
Underground economy

Underground economy refers to informal business, which is not subject to taxation. A great part of the economy is composed of self-employment and illegal trade. Therefore, this paper discusses the methods for measuring the underground economy, the US tax system as well as the reasons why some animals are more extinct than others, the evolution of payment systems and the plight of undocumented workers.

Measuring Underground Economy

Measuring underground economy is quite difficult in comparison to regular economy, but it is feasible. Several approaches, which combine both direct and indirect methods can be employed. Under a direct approach, several tools are utilized including the use of questionnaires, tax surveys and voluntary disclosure of tax audits. The surveys and questionnaires are the most common tools. One of their advantages is the availability of room for gathering a lot of information necessary for determining a clear structure of the informal sector. These tools, however, are limited since they rely on the voluntary dissemination of information from the respondents. Further, the quality of the information gathered strongly depends on the wording of the questionnaire.

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A second direct approach is the use of tax audits. Here, the collection of taxes by the social security agents and tax collectors is audited. If possible, a portion of the taxpayers is sampled out and scrutinized, and such means as sanctions for their failure of compliance with the regulations may be used. One major advantage of this approach is that a lot of information regarding the greatest tax evaders, majorly, self-employed people, is uncovered. The disadvantage of this approach, however, is its inability to reveal all evasions limited to the taxable activities. Therefore, these two direct approaches are incapable of showing the growth of the informal sector and fail at documenting all informal activities.

Thirdly, an indirect approach like the currency demand is used. This method is used to establish the relation between the demand for currency and the tax pressure on individuals. One advantage of using this method is that the cash is always recorded, which makes it easy to measure. However, the approach is limited because it assumes that all informal activities are transacted in cash, which is wrong.

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Systems and Procedures that Make Tax Collection in the US Efficient

Collection of taxes may be a very tricky affair especially when poor structures are in place. Such structures include poor documentation of employees, little legal sanctions on tax avoiders, a history of non-compliance, individuals’ failure to report their incomes and businesses’ fake books of accounts.

In the US, however, proper systems and procedures ensure an efficient and equitable taxation system necessary for yielding a high income of the country. One of the systems implies the use of tax withholdings on some assets, distributions and expenditures. Second, all income from self-employment must be reported as well as taxes must be paid on a quarterly basis. By imposing the duty of collecting employee’s income tax on the employers, the Us government has made employees’ tax report easy. Other incomes apart from the self-employment income are also filed annually. Further, due to the autonomous governance of the states in the US, local tax agents of each state also enjoy the powers of ensuring tax compliance.

Some of the procedures adopted to curb the evasion of taxes by the employers is ensuring their responsibilities for taking care of health insurance of their employees, their social security and remittance of the payroll taxes. However, self-employed workers seem to fail at fulfilling these requirements. Therefore, it is a must for them to report all their incomes to the government.

Why Some Animals are More Endangered than Others

Illegal trade of wild animals is one of the reasons of the extinction of some wild animals. Poachers are always driven by their greed and the need to make quick cash. However, not all animals are a target of the poachers who indulge in illegal trade. Wild animals are more valuable in trade hence falling the preys to illegal animal traders. Some animals like elephants are more extinct than other wild animals because of the value of their ivory. Therefore, the horns of these animals are a target. In the traditional societies, ivory was equated to gold because of its use in making ornaments, decorations and plastics. Elephants’ horns are valuable until today despite illegalization of their trade.

Another reason for the extinction of some animals is their importance in some traditional cultural activities. For example, in some societies, the leopards’ and tigers’ skins are used to make traditional clothes. Therefore, these animals become more extinct. In China, for example, the Xinjiang and the Qinghai Communities need the tiger skins to make their traditional regalia. The fur of some animals is also used to make purses, coats, jackets, which endangers these animals. Wealthy Europeans and Chinese, for example, prefer the real fur to a fake one. Some animals also have a medicinal value. For the above reasons, the most targeted animals at the verge of extinction include the African elephants, tigers, whales, wolves and black rhinoceros.

Putting the wildlife conservancy in the hands of private owners may help suppress the trade. For example in Kenya, a privately owned Lewa Conservancy has proven effective in the protection of wild animals. Private owners concerned with preserving the animals for tourism know that if they lose certain species, their source of income is cut hence they are more vigilant than people responsible for publicly owned conservancies.

The Evolution of the Payment Systems and their advantages and Inefficiencies

The first mode of payment in history was the barter trade, where payments were made in the form of the exchange of goods. Barter system of exchange was more flexible as goods were exchanged instantly for other goods, which also saved the money that otherwise could have been wasted moving from one shop to the other. The disadvantage of this mode of payment, however, was the difficult measurement of the value of the goods exchanged. This made the system fail. With the following development of the monetary economy, using cash to make payments became more rampant.

One of the advantages of this system is that the value of goods in exchange might be ascertainable in monetary value today. However, it had several disadvantages including theft of cash and inability of transacting huge amounts of money. Cash payments were more prone to theft. With the development of the banking system, the introduction of the check as a mode of payment reduced this risk. Business people can now engage in trade withdrawing huge amounts of money without worrying about its security because they can pay with a check. Nevertheless, this mode of payment also has its shortcomings despite continuous usage today. This mode of payment is quite slow and apt to forgery. Further introduction of the debit and credit cards has proved convenient but is also subjected to fraud.

Development of the banking system, however, led to the introduction of the electronic and internet banking. These payment opportunities have made it easier to make instant payments across the world. However, the system became prone to hacking hence endangering clients’ bank accounts. The latest mode of payment is mobile money. It is very efficient as it encourages instant payment and is more reliable. On the other hand, if thieves discover one's PIN, it may encourage theft.

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The Plight of Undocumented Workers in the US

Today, the number of undocumented workers in the US is increasing, especially in the agricultural and mining sectors. The population of these workers reaches around 11 million people today. Most employers, however, prefer using undocumented workers rather than documented to avoid liabilities if workers face any accidents while on duty. The hospitality industry and manufacturing companies also take advantage of the services of these people who are majorly immigrants. These workers are characterized by the use of forged visas and fake Social Security cards.

While the workers encourage this habit, it may have many negative implications on them. These workers will be harmed professionally because they will be susceptible to very low payments, face deployment at any time without recourse and their inability to push for their demands and promotions since they are ineligible to become union members. Financially, these workers may fail to participate in the Sacco schemes and get allowances. Moreover, their low pay may also jeopardize them. In terms of health, the employer cannot enjoy the benefits of medical insurance and therefore, in the event of any accident, they will incur treatment expenses. Lastly, these workers end up falling the victims of racism as there is no one to protect them.


In conclusion, it is plausible to conclude that the underground economy does a lot of harm to the US economy and the individuals at large. While the economy may be measured using direct and indirect approaches, both of them are limited. Such activities as illegal trading of wild animals, which makes them extinct, and the use of undocumented workers is harmful to the state economy. Finally, the modes of payment in the US also give a room for manipulation.

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