Hid­den rev­enue streams in the un­der­ground econ­omy

Is salary pre­sumed to be the only source of in­come for the or­di­nary em­ployee? What about paid va­ca­tion leave?

Business World - - OPINION - A. R. SAM­SON

Life­style checks on pub­lic fig­ures try to match de­clared rev­enues (salary of a bu­reau­crat) and net worth with a par­tic­u­lar style of liv­ing. (An im­pov­er­ished ex­is­tence, in this type of probe, need not be ex­plained.) When low rev­enues and high ex­penses com­bine, the ob­ject of cu­rios­ity can plead that the re­sort place he posted on his FB is not re­ally his (I was just a guest) or sud­denly re­veal that the de­ceased par­ents were very wealthy and the plan­ta­tion was in­her­ited.

An es­tranged spouse seek­ing a gen­er­ous set­tle­ment (I want half of ev­ery­thing he’s been hid­ing) is bound to break open draw­ers to dis­cover how many pass­books are be­ing kept un­der lock and key — hey, look how many I found. Such tac­tics are un­leashed most ef­fec­tively on pub­lic fig­ures. A press con­fer­ence with an ac­com­pa­ny­ing lawyer guar­an­tees me­dia cov­er­age and force the re­cal­ci­trant mate to pay at­ten­tion to his text mes­sages. Of course, col­lat­eral dam­age on the fam­ily’s rep­u­ta­tion can­not be helped — its omelette time and break­ing eggs (mostly his) hap­pens to be part of the cook­ing process.

Is it to be taken for granted that an in­di­vid­ual can only have one rev­enue stream? Is salary, re­ceived from a job or what­ever of­fice one oc­cu­pies at var­i­ous times in a ca­reer, pre­sumed to be the only source of in­come for the or­di­nary em­ployee? What about paid va­ca­tion leave?

In cor­po­rate ac­count­ing “Other In­come” can be con­sid­er­able, even if non-re­cur­ring, un­like reg­u­lar rev­enue streams at the top of the cash flow state­ment. This en­try can com­prise of the sale of an un­used ware­house at a large profit over ac­qui­si­tion cost, the col­lec­tion of a long past due ac­count al­ready writ­ten off, the ac­qui­si­tion of an un­prof­itable divi­sion by a cash-rich com­pany, or well... kick­backs. ( Yes, Vir­ginia, they also have them in the pri­vate sec­tor.)

In­di­vid­u­als too have other in­come not in­cluded in their tax fil­ings like the gains from the stock mar­ket or cap­i­tal ac­cre­tion from the sale of prop­er­ties. Both are al­ready sub­jected to fi­nal taxes and are con­sid­ered non-re­cur­ring, very dif­fer­ent from a den­tist get­ting paid for pro­phy­laxis. Okay, even den­tists do not re­port all the cav­i­ties they plugged.

There are cer­tain pro­fes­sions that don’t is­sue re­ceipts and do not worry about in­put VAT or of­fer se­nior cit­i­zen dis­counts, even if this gray seg­ment is their tar­get mar­ket.

It is pos­si­ble for a young and at­trac­tive fe­male to be liv­ing beyond her os­ten­si­ble means ac­quir­ing sig­na­ture bags and pricey sun­glasses, and even a car from hid­den rev­enue streams, with what can be con­sid­ered as un­ex­plained wealth. This oc­cur­rence is no longer un­usual as the un­de­clared in­come (and source of such) can even be en­hanced by emer­gency needs for ran­dom crises like a quick trip to the beach.

It is not al­ways from land­scape gar­den­ing that such a steady in­come is sourced. It helps when the in­di­vid­ual has a reg­u­lar oc­cu­pa­tion ( like hand­ing out prop­erty brochures at the malls) to ex­plain pe­ri­odic spurts of wealth (no pun in­tended). Here, dig­i­tal tech­nol­ogy is part of the mar­ket­ing process as it pro­vides speed of re­sponse and ser­vice de­liv­ery — so, would you

like the cac­tus de­liv­ered this af­ter­noon? Yes, we also han­dle bon­sai plants.

The re­mit­tance econ­omy also drives con­sump­tion of goods and ser­vices. This re­mit­tance need not all come from over­seas work­ers. What we call the “re­mit­tance econ­omy” usu­ally refers to in­ward re­mit­tances of OFWs now at the an­nual level of $30 bil­lion. This amount may have an added do­mes­tic com­po­nent, al­though econ­o­mists do not count the lat­ter as ad­di­tion to GDP as these are mere wealth trans­fers within the sys­tem. These are yet an­other ex­am­ple of trans-gen­er­a­tional ex­changes. They move cash from one de­posit ac­count to an­other.

There is fi­nally the other un­de­clared rev­enue stream from un­recorded sales like the box of straw­ber­ries sold by ven­dors when traf­fic is stalled or tips for masseuses pro­vid­ing ex­tra ser­vice, like re­flex­ol­ogy. These, along with the sale of smug­gled cars or ship­ments of tran­quil­iz­ers, are clas­si­fied as part of the “un­der­ground econ­omy”, un­de­clared and un­tracked ex­cept when used for con­sump­tion of goods and ser­vices.

Other in­come can ex­plain high spend­ing lev­els (Al­most 70% of the GDP is con­sump­tion), but the sources for such rev­enue streams are sel­dom dis­closed. But when they are pub­licly re­vealed, they are so hard to ex­plain... and even harder to jus­tify.

A. R. SAM­SON is chair and CEO of Touch DDB. ar.sam­son@ya­hoo.com

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