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?
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.