Tuesday, 14 July 2015

Documentation of economy

Documentation is nothing more than keeping the record of every transaction and every activity in the country. In general, people who want to avoid government regulations, habit of utility pilferage, tax evaders and avoiders are part of the undocumented economy. It is not necessary that all the informal activities are undocumented. In certain cases formal sector is also undocumented.
Problem of documentation is not just mere tax collection, but it is core part of good governance. It helps in eradicating the problem of terrorism, for example, having all the records of sim cards issued on respective CNICs.
Furthermore, better documentation helps in better policy formulation such as offering social security benefits to the lay off or unemployed persons can only be effective in the presence of proper documentation.
Avoiding government regulations, sometimes, is inevitable in the presence of higher inflation and lesser purchasing power of the people. People tend to do more jobs than one and hide it from the government. In this way they avoid legal problems as well as they can save more but not paying taxes. Therefore, these kinds of undocumented activities can be mitigated by change in regulations.

Documenting the economy does not imply that our economic activity will increase. There is a good possibility that economic activity is reduced after the documentation and will be unemployed due to high cost of documentation including paying utility bills, paying indirect taxes etc. As well as poverty may also increase after the documentation. This is one of the reasons that every economy has smaller undocumented part, where poor are working for their existence. 

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