The Informality Trap, Thematic evaluation

2.1.3 Supportive legal frameworks development, adoption and implementation

Recommendation: 5. Support appropriate and relevant reform of the tax system to accommodate formalisation of IE work. Take into consideration that appropriate reforms may lead to an overall increase in the number of registered firms and possible corresponding increases in employment. Take into consideration that formal enterprises are more productive and profitable when compared with informal ones.

REFERENCE: Kenyon, T. & E. Kapaz, 2005, The Informality Trap, Thematic evaluation, WB Viewpoint Series, Note 301, World Bank, New York. 

Evidence sample: Kenyon and Kapaz (2005) used data from the World Bank’s Investment Climate Survey in Brazil to show that firms that avoid paying tax by not registering are less productive and less likely to access financial markets than other firms.