Unified Social Tax Reform and Shadow Sector in Healthcare and Education

Abstract

The paper studies the interdependence between unified social tax decrease and the evolution of shadow output and shadow prices in healthcare and education. The shadow economy is regarded as the combination of purely shadow activity as well as informal labor within official economy. The analysis shows that although in healthcare lowering of the unified social tax rate causes the decrease of shadow output, in education, on the contrary, the growth of shadow production is registered. If the decrease of unified social tax is accompanied by the rise in personal income tax rate, the economy faces considerable growth of shadow and market prices for educational and healthcare services.