Informal Economy across the Developing Countries

The developing countries struggling to improve their people’s lives. In fact, there are some communities living in developing countries struggling to survive and just want to ensure there are foods to be served on their table instead of fulfilling their wants. In order to survive, people choose to move by themselves and start with a small business. The basic platform for them to survive – selling foods on the street. This is a common scenario if you go around to developing countries.

Besides selling foods, some services which use a low cost are also offered by them such as trishaws, cleaning the shoes on the streets, sewing clothes. Some of them run such businesses for side income, to fun, and the saddest story that I gained some of my informants are to survive and able to serve foods on the table for their family.

However, in terms of running such small-scale businesses, some of them do not have a formality in setting up their business. Thus, legal business identity was not registered and taxation was not able to be audited and collected by the government. Such elements create the potential of the informal economy to grow like mushrooms after rain around developing countries as the situation provide beneficial for the owner of small-scale businesses.

The situation creates the informal economy that exists in those affected countries. From a national level perspective, how is national income able to generate if the government is not able to collect the tax?