WAYS TO REDUCE THE MECHANISMS OF REDUCING THE HIDDEN ECONOMY IN THE COUNTRY

Abstract

The hidden economy, also known as the shadow or informal economy, poses serious challenges to sustainable economic development, tax collection, and governance. This study aims to identify and analyze the key mechanisms sustaining the hidden economy in developing countries and proposes practical strategies for reducing its scale. Using statistical data from various global indexes and national economic reports, this paper applies comparative and qualitative analysis methods to assess the impact of tax policy, regulatory frameworks, digitalization, and institutional trust on the size of the informal economy. The findings suggest that multifaceted policy approaches—particularly those involving fiscal reform, increased transparency, and technological innovation—are essential in combating the hidden economy. This paper concludes with specific recommendations for policymakers and stakeholders.