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National Interests: Priorities and Security
 

Illegal renting of residential property as a sector of the informal economy

Vol. 17, Iss. 2, FEBRUARY 2021

Received: 3 April 2020

Received in revised form: 25 April 2020

Accepted: 15 May 2020

Available online: 14 February 2021

Subject Heading: THREATS AND SECURITY

JEL Classification: H26, R31

Pages: 258–273

https://doi.org/10.24891/ni.17.2.258

Vasilii A. DADALKO Financial University under Government of Russian Federation, Moscow, Russian Federation
antikrizis1@bk.ru

https://orcid.org/0000-0001-5436-3286

Denis A. KUZNETSOV Financial University under Government of Russian Federation, Moscow, Russian Federation
3000334@gmail.com

https://orcid.org/0000-0003-2959-6509

Subject. Illegal renting of housing is a sector of the informal economy in the Russian Federation, which significantly damages regional budgets due to underpaid taxes from the activity.
Objectives. I review the residential rent market and existing measures to counteract illegal instances. I also formulate what specifically may be done to legalize the activity, thus increasing fiscal revenue of regions.
Methods. The study relies upon general and partial methods of research, such as analysis and synthesis, analogy, comparison, hypothesizing.
Results. The study focuses on the statistics of the illegal renting of housing, analyzes the liability for the activity, identifies pros and cons for tenants and lessees in case of uncontracted relationships. I examine existing measures counteracting the sector of the informal economy.
Conclusions and Relevance. Illegal renting of houses, among other thing, challenges the real estate market today. Certainly, people prefer to pay rental taxes, since the State does not have effective methods to trace wrongdoers, while respective bills and mechanisms are not intended to improve the position of tenants. To bring this informal sector to the legal ground, the government should contemplate what may be done to incentivize the registration of tenants’ income and further tax payments, rather than total control measures. To legalize the activity of tenants, the government should seriously revise the respective taxation treatment.

Keywords: income tax, residential rent, informal economy, tenant, money laundering, lessee

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