When we talk about the "shadow economy," we are referring to that part of economic activity that, for various reasons, remains outside the control of tax authorities. These transactions are not declared, do not pay taxes, and therefore do not appear in official Gross Domestic Product (GDP) statistics. It is a universal phenomenon: not a single country in the world is completely free of the shadow economy. The critical question is the relative size of this hidden sector in relation to the total economy.
None of us finds paying taxes particularly pleasant. These taxes make the goods and services we consume more expensive and reduce our disposable income. However, they are one of the main mechanisms through which governments finance essential services: healthcare, education, infrastructure, security, among others.
When a segment of the population or businesses avoids paying taxes by operating in the underground economy, the tax burden is redistributed among those who do comply, generating inequity and, in many cases, social unrest.
I recently consulted a report from the International Monetary Fund (IMF) with data updated to 2025. Although we must take these figures with caution, as measuring the underground economy is extraordinarily complex, they offer an illustrative picture of the magnitude of the problem. According to this report, in developed countries in the northern hemisphere, the levels of the underground economy are relatively low. For example, in the United States, it is around 5% of GDP, a percentage that may seem small, but in absolute terms, it represents hundreds of billions of dollars not controlled by the treasury.
In contrast, many developing countries show alarming percentages. In several African and Latin American nations, the underground economy can represent up to 40% or more of GDP. These high levels indicate not only fiscal oversight difficulties, but also a widespread distrust of institutions, inefficient tax systems, and deeply rooted informal economies.
I was particularly struck by the case of China, which, according to the report, has a 20% shadow economy. For a country with one of the world's largest economies, this percentage represents a colossal volume of economic activity below government radar. It's a reminder that even regimes with strong state oversight capabilities find it challenging to eradicate these practices.
In this scenario, technology presents a double-edged sword. On the one hand, advances in digital payments, the widespread use of cards, and other controlled payment applications allow governments to track every transaction and reduce the possibilities of tax evasion. For example, in countries like Sweden and Norway, where cash payments are almost nonexistent, the shadow economy remains at historic lows.
However, not everyone welcomes this level of oversight. Many citizens and small businesses feel that completely handing over their financial data violates their privacy and economic freedom. And in some cases, these monitoring technologies can be seen as potential instruments of mass surveillance.
Furthermore, there are structural factors that fuel the shadow economy that go beyond the simple desire to evade taxes: excessive regulations, stifling bureaucracy, inflexible labor markets, high costs of business formalization, or even a lack of confidence that taxes are being used efficiently.
The challenge for governments is to find the delicate balance between facilitating economic formalization, maintaining a fair and proportional tax system, and guaranteeing a reasonable degree of privacy for citizens. Tax amnesty programs, streamlining procedures, incentives for small business formalization, and tax education are tools that have proven effective in different contexts.
The shadow economy is, in short, a phenomenon as old as economic activity itself. Its reduction depends not only on surveillance and punishment, but on building more just societies, with more trustworthy institutions, where paying taxes is perceived not as a punishment, but as a contribution to a tangible and perceptible common good.
In the coming years, we will see how the combination of technology, public policies, and cultural changes will shape the size of this "invisible economy," which, paradoxically, has a very real impact on our lives.
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