Law-Making and the Shadow Economy in Russia: Race Ahead of the Curve

Abstract

The shadow economy in most academic works is viewed as a negative phenomenon, something that the state should fight. Lawmaking is a one of methods to counteract pre-criminal and criminal shadow economy activities. Counteraction to the pre-criminal shadow economy is carried out by narrowing the so called “grey zones” where unregulated and untaxed activities occur. Grey zones are characterised by a difficult distinction between the normative and non-normative and a sense of the need for normative regulatory of an economic activity. To narrow the grey zone, it is possible to use two different strategies for creating norms. Firstly, it is possible to impose restrictions and prohibitions on various subjects (for example entrepreneurs, public and municipal officers). Secondly, it is possible to simplify the procedures for registering, licensing and control (supervision) economic activity. Other strategies are preferable for fighting the criminal shadow economy: criminalisation of certain types of economic activity, tightening of sanctions, the imposition of restrictions and prohibitions which impede the use of incomes or property derived from corruption. Lawlessness and the shadow economy seem to enter the race ahead of the curve of prescription and prohibition - that is, the law lags behind those who exploit the “grey zones”. So, the legislator needs to have tools for anticipating and preventing the growth of the shadow economic sector. The need for such instruments is exacerbated in conditions of digital shadow economy development.