Exposing the unobserved economic areas, what are the challenges?

Activities such as smuggling will be measured with the Economic Sector Statistics Scheme. In the photo: Leaders of Hai Phong City People's Committee and Hai Phong Department of Customs check a batch of Converse shoes showing the words "Made in USD", but the shipment originating from China was discovered and captured by Hai Phong Customs when shipped to Hai Phong port area (July 2017). Photo: T. Binh.

Many difficulties in measurement

In practice, so far no economy has fully measured the results of all production and business activities. This shows the complex difficulty of economic information statistics, even for developed countries. However, because of the importance of fully calculating the size of the economy as well as for the development of the economy, unobserved economic activities appear more and more diverse and complex, exist in many areas, and so far, not only Vietnam is interested in statistics of unobserved economic areas, but many countries around the world have conducted researches to measure this economic area.

According to the Economic Sector Statistics Scheme that has not been observed and approved, this economic sector consists of 5 groups: Underground economic activity; illegal economic activities; unofficial economic activities; self-produced and self-consumption economic activities of households; Economic activities are missed in statistical data collection programs.

According to Mrs. Nguyen Thi Huong, Deputy General Director of the General Statistics Office, there are many economic activities that have not fully updated the production and business results because they are still missed in the statistical data collection programs. There are two components, the underground economy - which is a legitimate economic activity but is intentionally hidden in order to avoid the obligation to pay taxes, avoid the implementation of legal procedures, administrative procedures and commune responsibilities.

Illegal economy - is an economic activity prohibited by law and legal economic activities, but activities that have not been licensed are economic activities that have not been enumerated.

In terms of statistical methods, the statistical agency itself has determined that the measurement of the unobserved economic sector will face many difficulties, because it includes many activities with an economic nature. It is very different, but often intertwined, making it difficult to use measurement methods.

Another problem is managing the cash flow and the source of cash flow for accurate information on economic activities and income of people. In this regard, economist, Dr. Nguyen Minh Phong said that, in order to be able to statistically manage unobserved economic areas, Vietnam must reduce cash use. According to Dr. Nguyen Minh Phong, the most important thing now is observation and tax collection will be calculated later. In order to bring these economic areas into management, the state statistics is a great ambition; it takes a long time and is also difficult, even developed countries like the US still cannot do it.

Need to enhance information sharing

According to Dr. Nguyen Minh Phong, the statistic of the economic sector that has not been observed is a way to "gather" frauds and tax evasion into management, which brings benefits to increase budget revenue. However, with underground economic activities such as smuggling, it is very difficult, because this behavior is proactive and hidden from related people. For example, businesses hide official revenue. The clarification is due to the management ability of the authorities, not to mention not only businesses, but this behavior can also have collusion with officials of state agencies.

Currently, the most difficult is exposing the underground, illegal and unofficial economic elements, because they are all activities intentionally hidden by the subjects. The representative of the General Statistics Office said that in 2019, each category and specific meaning of the elements, especially underground and illegal economic sectors, will be identified. The Government assigned to the relevant ministries and agencies to coordinate with the General Statistics Office to collect information and will develop a feasible roadmap for implementation.

The challenge of measuring the unobserved economic sector comes not only from the difficulty of properly assessing the results of these economic activities, but also from the aftermath of the economic scale. In the direction of increasing, Vietnam will likely face high public debt. However, according to Mr. Nguyen Bich Lam, there is no need to worry that the issue of adding GDP scale will increase the scale of public debt, because the scale of public debt will be appropriately regulated by the National Assembly and the Government in each period. Vietnam's public debt is currently at 61.8% of GDP, compared to other countries, this size is normal. With the size of Vietnam's GDP, the National Assembly set a ceiling of public debt of not more than 65% of GDP, and the fact that public debt size is also decreasing, therefore, concerns about increasing public debt when the scale of GDP increases is an unnecessary worry.

Regarding the feasibility of the scheme, Mr. Duong Manh Hung, Director of the National Accounts System Department (General Statistics Office), said the statistic of the economic area that has not been observed is very difficult in terms of treatise and practice. Therefore, it is necessary to have the participation of all ministries, branches and localities with the General Statistics Office. In the process of developing the Scheme, there were 16 ministries and agencies accompanying the unit and will continue to coordinate in the coming time to determine the list and scope of each element to collect information and report fully. According to Mr. Hung, there is a need to strengthen the sharing of administrative records. At present, the legal environment of business is increasingly improved, many ministries and branches have implemented projects such as the State Bank to develop a project on non-cash expenditure; The General Department of Taxation has a Scheme on expanding tax and anti-tax tax bases... accordingly, with the implementation of these projects to be synchronized, will limit the unobserved economic sectors.