The formal sector consists of the businesses, enterprises and economic activities that are monitored, protected and taxed by the government, whereas the informal sector is comprised of the workers and enterprises that are not under government regulation. British anthropologist Keith Hart coined the term "informal sector" in 1973 as part of a study on Ghana. There are many conflicting theories as to the role and benefits of the informal sector.Know More
In contrast to the formal sector, the laborers, businesses and activities that make up the informal sector are not registered with or taxed by the government. For this reason, scholars sometimes refer to the informal sector as the black market, shadow economy or underground economy. Originally, the term referred to self-employed small enterprises like street vending, sewing, artisanry and small farming. It now also includes wage-earning jobs like crop-harvesting, cleaning and any other unprotected occupation.
Academics and policy-makers view the informal sector with conflicting views. Some believe the informal sector fuels entrepreneurialism and provides a cushion during economic crises. Others argue that the informal sector undermines taxation and regulation and thereby weakens the overall economy.
Globally, the informal sector is steadily growing. It constitutes the majority of the economy in both Latin America and Africa. This pattern is the result of governments' failure to plan for sufficient formal jobs in the face of expanding global communication and competition.Learn more about Taxes
Australian workers may deduct work-related car expenses from their taxes without a logbook using any one of three methods, according to the Australian Taxation Office. One can choose the most advantageous method, but Vasin Accountants and Taxation Advisors suggests that a fourth method, the logbook method, provides the largest tax deduction.Full Answer >
A value-added tax, or VAT, has the advantage of offering an efficient way to raise funds for government programs from a broad taxpayer base. Its primary disadvantage is the effect such costs ultimately have on the consumer. According to the New York Times, VATs are used in every developing country other than the United States.Full Answer >
Taxes pay for a variety of public goods and services that include enforcement of civil order, construction of public infrastructure and reduction of government debt obligations. In 2013, the Internal Revenue Service collected about $2.8 trillion in taxes.Full Answer >
The reason citizens pay income tax is so that the government can have the funds to build libraries, roads, and fire and police stations. Income tax is also used for welfare and social security programs. In addition to income taxes, there are also sales taxes, corporate taxes and property taxes.Full Answer >