Estimates of the informal economy of Cameroon and the impact on tax yield for the period of 1975-2004

Abstract

Cameroon has undergone a lot of econom1c, social and political changes since independence. These changes have forced individuals and companies to also adopt strategies to meet up with the challenge of adjusting to a new economic, political, legal and social environment. An alternative for those not capable or not willing to abide by imposed regulations is to function in the informal economy. But what then is the informal economy? This no doubt is the question that comes to mind at present. There is no precise answer as there are as many definitions as authors. However, one of the most popular definitions of the informal economy is Schneider's. According to Schneider (1986), the informal economy is all economic activities that contribute to value added and should be included in national income in terms of national accounting conventions but are present! y not registered by national measurement agencies (Schneider, 1986). The informal economy is an integral part of all economies be it developed, transitional or under developed; indeed it's a universal reality. It is clear that this phenomenon is very complex and difficult to measure because of its multiple definitions and contexts. In this study we have attempted a definition of the informal economy and use the indirect approach to estimate it in Cameroon from 1975-2004. Specifically we used two different monetary techniques developed by Guttman (Guttman, 1977) and Tanzi (Tanzi, 1983). From the estimated information economy, we have attempted to get its impact on tax yield specifically on tax evasion and avoidance for the same period.