FOREIGN STATE EXPERIENCE OF THE POLICY OF COMBATING THE DEVELOPMENT OF THE HIDDEN ECONOMY

SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 25 FOREIGN STATE EXPERIENCE OF THE POLICY OF COMBATING THE DEVELOPMENT OF THE HIDDEN ECONOMY S.M. Mambetkarimov University of Public Security of the Republic of Uzbekistan, Doctor of Philosophy (Phd) In Economics https://doi.org/10.5281/zenodo.17854359 Abstract. The article discusses the dynamics of the development of the underground economy in the world and in the region in the context of globalization, its impact on economic security, the experience of developed and developing countries, as well as conclusions and proposals for Uzbekistan. Based on statistical data provided by international organizations such as the World Bank, the International Monetary Fund, and the World Economic Forum, the reasons for the expansion or contraction of the underground economy and mechanisms for combating it are analyzed. Keywords: underground economy, informal sector, macroeconomic security, tax burden, corruption, progressive tax, international experience. Introduction In the context of global changes, the expression of our country's increasing integration into international relations is being determined in the laws being adopted and presidential decrees. Therefore, there are functions of the government that must be implemented without delay. One of them is to prevent the spread of informal economic activity in all areas. The spread of the shadow economy, along with macroeconomic imbalances and limited resources, has been recognized by the World Economic Forum (WEF) as the main global risks of the coming decade. The globalization of financial systems, the development of international banking networks, electronic trading systems and real estate transaction networks, and the lack of sufficient coordination of countries' activities to combat the development of global shadow trade and financial flows, create conditions for the use of financial instruments and ensure the implementation of real estate transactions. The aggravation of the problem of developing the shadow economy of world markets in the context of eliminating crisis events and ensuring the stability of global and national financial systems has determined the urgency of considering it as a problem not only of the country, but also of the entire world economy. Disguised employment and financial flows are identified as the main problems of hiding economic relations. Therefore, it is important to study the hidden economy on a global scale, identify the specific features of its manifestation in different countries, and develop effective mechanisms of state policy to combat the development of the hidden economy and the world economic system. It is in the context of globalization that E. Weiner considers the essence of the hidden economy as a global phenomenon that goes beyond the borders of one country. According to the World Bank, the shadow economy is an activity that is outside the control and regulation of the state. The shadow economy includes any economic activity that is not registered and not taxed, including criminal activity. According to the World Bank methodology, SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 26 total shadow production can be divided into those that are measured by statistical observation and those that are not. Due to the impact of the shadow economy, global economic growth slowed from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024. Economic growth in advanced economies slowed from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024, with stronger-than-expected economic performance in the United States but weaker-thanexpected growth in the euro area. Growth in emerging market and developing economies has slowed to 4.0 percent in 2023 and 2024 from 4.1 percent in 2022. The medium-term global economic growth forecast is 3.1 percent, the weakest in decades, and the outlook for countries transitioning to higher living standards is weak. Global inflation is steadily declining from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024. In particular, as E.Weiner noted, “...in more precise definitions, the shadow market is a group of independent, very wealthy countries and investors who have the ability to actually control the world economy through large stocks and bonds.” If we rely on this idea, they include fixed capital, foreign currency units, and other forms of funds transferred to actually operating investment organizations and large state holding companies. Overall, the World Bank forecast, based on existing factors included in previous models and, most importantly, new factors that may influence the future evolution of the shadow economy, expects the size of the shadow economy to decline globally by 2025, from 23% of global GDP in 2011 to approximately 21% in 2025. Research into economic activities that are not included in official statistics suggests that illegal transactions, i.e. economic crimes, are a part of the clandestine economic activity and have undergone significant changes due to integration into the global community. Taking into account the statistics provided by the VEF, the share of some products and services prohibited by law in the total turnover is as follows: the volume of counterfeit pharmaceutical products is 20 percent per year, the total share of the United States due to the sale and purchase of black ops will be more than $ 100 billion in 2023, which is more than 11 percent compared to the previous year, prostitution - $ 200 billion, counterfeit electrical goods - $ 100 billion. As you can see, the markets for some of the listed goods exceed the budget of the Republic of Uzbekistan. The volume and specifics of economic activity in some regions and countries, which are not included in official statistics, are due to the chosen methods of development and the implementation of an open market policy. For example, according to statistics provided by the International Monetary Fund, in 2023 the amount of goods and services produced worldwide annually reached 105.0 trillion US dollars. In advanced economies, economic activity not included in official statistics accounted for 12-16 percent of total goods and services produced, in middleincome countries it reached 23-25 percent, and now in developing countries it has reached 30-50 percent. In some countries, even higher shares are reported. In countries such as the United States (7.3%), Switzerland (7.5%), Austria (8.7%) and Japan (9.6%), the share of informal business activity is estimated to be low (at 7-10% of GDP). In countries with a high level of development, the reason for conducting business activities without being included in official statistics is due to the high taxes paid by business entities and increased control. By the size of the hidden economy, Asia-Pacific countries can be divided into 3 groups: Group I includes 8 countries with the smallest size of the hidden economy (9-19.0%). From the beginning of 2023, this group includes: Japan - 9.6%, Australia - 9.9%, New Zealand - 10.0%, Singapore - 10.4%, China - 12.7%, Hong Kong - 13.6, Mongolia - 15.1%. SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 27 Group II includes countries whose hidden economy indicators are average for all countries of the Asia-Pacific region and account for almost 20-35% of GDP. This group includes: Vietnam - 20.5%, Taiwan - 22.5%, Indonesia, the Republic of Korea - 22.7%, Uzbekistan - 27.2%, Papua New Guinea - 34.6, etc. The worst indicators in this group are the Philippines - 34.1 and Turkmenistan - 34.5%. Group III includes countries with the largest hidden economy indicators among all AsiaPacific countries, accounting for almost a third of GDP. We include the following in this group: Thailand - 46.2%, Myanmar - 49.0% and Afghanistan - 72.0%. The worst indicator among this group is in Afghanistan, where the hidden economy accounts for - 72.0% of GDP. As a result of research conducted by the famous French magazine "Le Monde", it was found that 66.5% of work carried out in the European region that is not included in official statistics is in the construction and agricultural sectors, and 33.5% of individuals receive income from small purchases, catering, and transportation without reporting it to government agencies. Also, the informal economy plays a special role in the development of these countries. Because as the dynamics of the creation of products and services in the legal sector decreases, the dynamics of the volume of work not included in official statistics increases. In Western countries, the volume of economic work that is not included in official statistics depends on: -total amount of taxes and mandatory payments; -abundance of labor resources; -inefficiency of economic activities; -uneven distribution of revenues; -corruption and ineffectiveness of government control, etc. According to the methodology presented by F. Schneider, it is appropriate to list the following factors and reasons that contribute to the development of clandestine business practices in countries with leading economies. Reasons for the growth of the shadow economy in developed countries Factors contributing to the growth of the shadow economy Level of influence, % (a) (b) Increase in the tax burden and social security contributions 35-38% 45-52% Quality of public institutions 10-12% 12-17% Transfers 5-7% 7-9% Labor market regulation 7-9% 7-9% Public services 5-7% 7-9% Taxpayer ethics 22-25% - Influence of all factors 84-89% 78-96% (a) average values obtained in 12 studies (b) average values obtained in 22 studies Source: Created by the author based on data from F. Schneider. Thus, according to the results of F. Schneider's research, the growth of the tax burden and the amount of social security contributions have the greatest impact on the economic relations of the European Union countries, with a share of 35-52%. On the other hand, there is a large income disparity. According to scientists, the ratio of the income of the poorest 10% of the population exceeds 12 times, while in most developed countries of the world this ratio is much lower, in SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 28 particular, in Germany the income of the richest 10% (top ten) is 6.9 times higher than the income of the poorest 10% (bottom ten), in Belarus - 6.9 times, in Canada and Japan - 3.7 times, and in Sweden it is the lowest and 2.7 times. A single rate of personal income tax, with a high level of income stratification among the population, creates public confidence in the injustice of the existing distribution system, thereby reducing the labor activity of the population and reducing the economic efficiency of development. That is why progressive taxation of personal income of citizens is widely used in most countries of the world. It is worth noting that in economic development, the maximum personal income tax rates in 2023 are 37% in the United States, 45% in Germany and France, and this means that 80% of the federal budget in the United States will be provided by taxes that fall on the 20% of citizens with the highest incomes. Personal income tax in our neighboring countries, including Kazakhstan, Kyrgyzstan and Turkmenistan, is 10%, and in Uzbekistan it is 12%. China, with a population several times larger than Russia, has successfully implemented a 9-tier progressive personal income tax system with a minimum rate of 5% and a maximum rate of 45%, which has ensured stable economic growth even in the face of the global economic crisis. The method, in which the tax rate increases with income growth, is called the Swedish model, which guarantees the availability of material assistance and services for the most vulnerable segments of the population. As for the high level of personal income tax collection in developed countries, this is ensured by a 100.0% computerized system of accounting for income and calculating taxes. It is advisable to support the same idea of controlling the income and expenses of citizens, and in order to justify the possible scale of progressive taxation in the Republic of Uzbekistan, it is necessary, first of all, to introduce computer accounting of the income and expenses of politicians and civil servants, as well as other employees. That is, a system is needed that would make the income and expenses of all citizens transparent. The resulting database of income and expenditure can serve as a basis for calculating the scale of progressive taxation, possible losses or additional revenues to the budget. Raising the minimum wage established by the government is a practice in most countries aimed at including wages paid by workers in official statistics, which is intended to include wages in the taxable base. It indicates an increase in the government's contribution to the implementation of tasks such as support, control, etc., which are reproduced through wages. Many countries are focusing on reducing the amount of money flowing into the economy and corruption that is not included in official statistics. In order to increase the integration of our country with the world community, it is necessary to implement the conclusions of advanced countries from both a political and economic perspective. Corruption leads to practices that are not included in official statistics in all countries. According to the 2010 Corruption Perceptions Index, the Republic of Uzbekistan is among the 20 worst countries with the highest level of corruption (on a scale from 1 to 10), followed by Somalia (score 1.1) - 178th place, Afghanistan (1.4) - 176th place, Uzbekistan - 172nd place, Turkmenistan - 173rd place, and Kyrgyzstan (2.0) - 164th place. The 20 best countries with the lowest level of corruption are Denmark (9.3) - 1st place, Singapore (9.3) - 2nd place, Sweden (9.2) - 5th place, Germany (7.9) - 16th place, and Japan (7.8) - 16th place. Based on the data provided, it can be concluded that the level of corruption in the Republic of Uzbekistan is very high (the higher the score, the more "transparent" the economy). According to the Corruption Perceptions Index by 2024, the Republic of Uzbekistan will be rated 32 points in the overall ranking out of 180 countries, an increase of 4 points compared to 2022, ranking 121st. SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 29 Figure 1. World Corruption Perceptions Index (as of 01.01.2025) Based on the data presented in Figure 1, in 2024, according to the Corruption Perceptions Index, Denmark ranked 1st with 90 points, Finland ranked 2nd with 88 points, Singapore ranked 3rd with 84 points, Sweden ranked 8th with 80 points, Germany ranked 15th with 75 points, Hong Kong ranked 17th with 74 points, Japan ranked 20th with 71 points, the USA ranked 28th with 65 points, China ranked 76th with 43 points, Kazakhstan ranked 88th with 40 points, and Kyrgyzstan ranked 146th with 25 points. This, in turn, requires constant monitoring of the implementation of reforms aimed at reducing corruption in the country. The most successful countries in the world in preventing corruption are Denmark (6%), Norway (10%) and Finland (16%). Taking into account their practices, in order to completely eliminate corruption in our country, it is necessary to cover these five fronts: 1. Creating a successful system of justice that obeys only the law by inviting internationally recognized experts to the judicial system for personnel selection. 2. Using all available resources to study and draw conclusions from the actions of the parties involved in the case when considering criminal, civil and economic cases. 3. Ensuring the participation of local and foreign entrepreneurs in the transparent conduct of the “society - government - business” processes. 4. Auditing funds allocated from the state budget for security and defense, programs, quotas and signed agreements. 5. Actions aimed at preventing corruption should be implemented with the help of the general public, not just empty words, but with firm measures and methods that have proven to be effective. Austria is a country with a low level of the shadow economy and a relatively high level of corruption perception (74 points, 13th place). The main direction of the fight against corruption in the country has been the implementation of measures to prevent corruption among civil servants. To this end, Austrian civil servants are prohibited from accepting gifts intended to gain favor or a specific benefit that an official may give in the exercise of his powers. The fight against corruption in the Netherlands is based on the following basic principles: - regular reporting and transparency, in particular, the Minister of Internal Affairs reporting to parliament on corruption cases and measures taken; 010 20 30 40 50 60 70 80 90 Qirg‘iz Respublikasi (146) O‘zbekiston (121) Qozog‘iston (88) Xitoy (76) AQSh (28) Yaponiya (20) Germaniya (15) Singapur (3) Finlandiya (2) Daniya (1) 25 32 40 43 65 71 75 84 88 90 SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 30 - development of a system for monitoring possible sources of corruption and suspicious persons; - development of anti-corruption legislation for officials; - a strict system of penalties, in particular, a ban on holding public office, fines, temporary suspension from performing duties; - introduction of units in all state authorities that monitor the activities of employees; - publication of materials on corruption-related cases, if they do not harm the national security system; - civil servants have the right to familiarize themselves with their full description; - the functioning of a personnel training system for civil servants that explains all the nuances related to their activities; - development of a state security system to combat corruption, for example, the activities of the social police; - oblige civil servants to register all cases of corruption known to them and establish cooperation with the media. It is also appropriate to draw attention to the experience of Belgium (73 points, 18th place) in terms of measures to prevent the concealment of funds and the shadow economy, where the country has a Central Anti-Corruption Agency. Its tasks include: - identifying the scale of corruption, controlling and exposing corruption-related schemes in all forms of ownership of economic activities; - checking purchases and subsidies made at the expense of budget funds for corruption before they reach their owners; - investigating cases of corruption in the field of placing state orders, public procurement, and the distribution of subsidies, and providing assistance to the judicial police. At the same time, since all serious crimes related to corruption or harming the interests of the public service fall under the responsibility of this department, regardless of whether they relate to the activities of the Department or other structures, they can exercise their powers only by order of the prosecutor's office. To combat the shadow economy and corruption, the German government has established a number of organizations, including the Federal Financial Police, the Department for Combating Organized Crime and Corruption, and the Internal Investigation Department. German law significantly limits the ability of civil servants to engage in secret and corrupt activities. They are fully personally liable for violations of the lawfulness of their actions and official duties. After leaving the civil service, a civil servant must comply with the rules on non-disclosure of his previous activities. If it is necessary to provide information about his previous place of work for subsequent employment, permission must be obtained from the organization where he worked. Usually it is provided by the head of the institution. Only authorized persons may provide information to the press. A civil servant is obliged to report any criminal convictions known to him. Such a strict system of prohibitions and restrictions is compensated by a guarantee of high wages, additional benefits, job security and career growth. A civil servant is prohibited from engaging in other types of activities without the permission of a higher official body. Permission is not required only when accepting guardianship, caring for a sick or infirm person, fulfilling obligations imposed by a will, engaging in a liberal profession, scientific or academic activity, or managing his own property. Civil servants do not have the right to engage in entrepreneurial activity, personally or through authorized representatives, participate in the management of an SCIENCE AND INNOVATION INTERNATIONAL SCIENTIFIC JOURNAL VOLUME 4 ISSUE 12 DECEMBER 2025 ISSN: 2181-3337 | SCIENTISTS.UZ 31 enterprise or organization, or be a member of the supervisory board of an enterprise of any form of ownership. All other issues related to the work of a civil servant are regulated by the regulations of the federal government that have the force of law. According to them, any activity that does not belong to the main type of activity is considered external, regardless of the place of work. Both the amount of money and its material equivalent are considered remuneration for side activities. The maximum allowable annual amount of such bonuses is established for various categories of employees. If, after the termination of the main activity, the employee is engaged in work related to official activities, he is obliged to declare this at his last place of work. If there is a suspicion that any labor activity of a civil servant may harm the state in the future, he may be banned. Such a ban is issued by the last higher official body of the civil servant and expires five years after the end of his term of service. The world community has always taken large-scale measures aimed at combating the development of the underground economy, since in the conditions of globalization, international underground economic activity is a global problem, negatively affecting not only the world economy, but also non-economic sectors. It is precisely these circumstances that require comprehensive improvement of the mechanisms of state policy to combat the development of the underground economy in theoretical, methodological and practical terms. Conclusions and recommendations Based on the above, the analysis of international experience shows that: 1. Simplify the tax system and introduce fair progression. A progressive tax system adapted to national conditions, as in the experience of China, Germany, and Scandinavia, will significantly reduce informal activity. 2. Introduce an income-expenditure monitoring system. An electronic monitoring system (E-Audit, E-Invoice) will limit the possibility of hiding income. 3. Fully digitize employment contracts. Based on the experience of high-income countries, informal employment will decrease. 4. Institutional strengthening of the fight against corruption. The shadow economy will not decrease without increasing the transparency of supervisory bodies. 5. Strengthen international cooperation in reducing the shadow economy. It is necessary to expand the system of cooperation with organizations such as FATF, OECD, and WEF to monitor global financial flows. REFERENCES 1. Baranov S.A. 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