Effects of Tax Audit on Tax Evasion and Grey Economy in the Republic of Serbia

Sažetak

The aim of this paper is to point to the systematisation of matter, which relates to the assessment of the efficiency of tax control as the mainstay of the reduction of tax evasion and the grey economy in our country, with a comparative analysis with the developed countries and countries in transition. Financial effects of large-scale tax evasion may contribute to generating the budget deficit. Economic effects of tax evasion can be particularly damaging to economy. It can upset parity of conditions for doing business by lowering production costs in taxpayers and economic sectors that resort to tax evasion. This creates unfair competition between conscientious and unscrupulous tax payers, which on economic plan reflects through the price disparities between goods manufacturers, and especially if the tax evasion has reached a significant threshold. Disturbances in economy may take the form of sectoral imbalances on the market when economic choices of business entities are disrupted under the influence of tax evasion, which further affects rationality and economic efficiency. If all taxpayers settled their tax liabilities, there would be an opportunity for reducing tax incidence. In countries where the rule of law works only “bravest” dare to evade taxes. Most countries have undertaken a series of measures aimed at combating tax evasion and the grey economy, however, the success of the struggle is different.

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