Business World

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?

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

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