 Good, well, thank you, thank you, friends. I'm a proud member of the board of WIDER and also a proud member of the board of WIGO. So I'm very happy to be at this session. Much of my work is actually on, in this area, is on informality and labor along the lines that Marty and Imran talked about. And the work of WIGO is, of course, very relevant here. So in some sense, if I talked about that, it may be repeating a few things. So I thought, let me just take a different perspective on this altogether and talk about tax policy and informality. Because in fact, it's a completely unrelated, it's a completely different literature. It's a different discourse altogether. It's the IMF Fiscal Affairs Department who deals with those things. But the terms informality, we must tax them, and so on and so forth, appear in that discourse as well. And so I want to talk a little bit about that. But essentially, it's a variation on the same theme, which is that viewing informality as an aggregate lump is analytically wrong and leads you into policy errors. And I want to talk about that in the context of tax policy, just as Imran and Marty have talked about that in the context of labor regulation. So these are some papers that work. This is work jointly with Michael Keane. There's a technical paper. Then there's a more general paper in finance and development, which you're welcome to look at. And there's a blog piece in VoxEU recently. So when you look at tax challenges and we look at documents which lay out tax challenges for developing countries, informality is always put as a challenge, as a problem at the top. Taxing the informal economy actually leads the ADB's tax priorities in a recent document. And reducing informality is put as the objective of tax reform. That's what we should do. We should reduce informality. But what does this actually mean to reduce informality? And is it a useful guide to policy that we use as an indicator of the success of tax policy, some measure of informality coming down in that context? So in the tax context, in the public finance context, insofar as any precise meaning is given to this term, and actually I should say that discussion of informality taxation is really quite imprecise, simply taken to mean non-remittance of tax. If you're not remitting tax, you're part of the informal sector. If you're not remitting tax, which you're due to pay, you're part of the informal sector. But the point is that there are all sorts of reasons why a firm and individual might not pay a tax. They could actually simply be below the threshold at which the tax bites, or they could be avoiding tax, or they could be evading tax. And each of these things actually makes a big difference from the analytical point of view and from the policy point of view. So the basic point that we make, that Mick and I, Mickin and I make, is the reason why a tax isn't paid may matter for policymaking as much as the fact that it is not being paid. And because those numbers that are added up to say this is the total amount of informality. And in fact, the structuring of our tax systems should look not simply at the overall number of tax unpaid or informality, but why those taxes are not paid. So as we say, we believe that this is a much more useful strand of analysis than the general objective of analytical target of aggregate informality and the policy objective of reducing informality. So let me give you a conceptual example. Consider the VAT, which in almost all countries, there's some threshold level of sales above which an enterprise pays a fixed tax on all of its sales, that's a VAT threshold. And in addition, enterprises face some sort of compliance cost in complying with the tax. So suppose for example, that there's some natural firm size which would exist in the absence of the tax. This is their total potential sales. So in the world without the tax, there's this division of firms and there were large sales, small sales, et cetera. And now I introduce this tax which says if your sales are above this threshold, you pay VAT. What sort of responses does that lead to in the amongst firms? Well, you can think of different sorts of responses. One is that the firm whose potential sales are above the threshold stays below the threshold, perfectly legal, but it doesn't pay tax because it's below the VAT threshold. Alternatively, you could think of a firm which fully pays up its tax, it's above the threshold but it decides to pay. And you have things in between where the firms could avoid, could underreported sales. Or the firm could become a ghost firm, as they say in the literature, and not just disappear from the books altogether. These are all different responses that firms make and that we know they make to a tax. And we, Mick Keen and I, we look at this and with this setup, with costs and benefits of doing each of these things, you know avoidance is costly, evasion is costly, high those clever lawyers and so on and so forth. With a set of reasonable assumptions, we argue, and you can look at the technical paper, that firms can plausibly fall into five categories, ranging from the smallest in terms of those potential sales to largest. What does that, what might that look like? Here it is. So we have, what might be termed micro enterprises. These are the smallest of all and they're below the tax threshold. They're below the VAT tax threshold. Then you might call that the adjusters. These are the next size up and these firms will go just below the threshold and they'll be hiding, so to speak, just below the threshold. At this end, they're the compliers. They're very large firms and you know the cost of them avoiding or evading is just too large and they just fully comply and pay up. And in between are, so to speak, partial. People who partially evade the tax, that they under report, okay. And of course there's a cost. If you get caught, you're gonna be punished. There's a probability of getting caught, which may depend upon your size, et cetera. So you have to model all of those things in your economic analysis. And then in the middle, you have the ghosts who just simply disappear from the system. The tax administrators tell us that this is not too bad a way of describing what actually happens in the VAT, in the VAT setup. Now our central point is the following. What here is formality? Well, formality technically defined are those firms which comply with the tax law. It's this category of firms. Therefore, informality of course is the complement of formality. Therefore, all these are informal. But this, all of this is comprised at least of four separate categories. This is a little bit like Marty's triangle with the different categories of informality in the labor arena. And there are different economic incentives in each of these different categories. Because each, the boundary between each of these categories is dependent upon balancing the costs and benefits of being here versus there, being here versus there, being here versus there, et cetera. So overall informality is all these four categories. But our argument is that analytically and from the policy point of view, it's very important to know which of these categories any firm is in. Let's do a small exercise. This is what I just said. By definition, the formula and price of those are complying. The all other categories are informal. But every informal firm is informal in its own way to quote a famous opening line of an old. So consider the following key policy choice, which is often put, which is choosing the level of the VAT threshold. It's a classic policy choice. Where do you choose the VAT threshold? And indeed, when people say, let's reduce informality, what they really mean is reduce the threshold at which VAT bites so that you get more of those small firms into the tax net. That's a classic policy trade-off that you face in policy context. In fact, if I go back to this diagram, what I'm doing is changing the threshold here. That is not going to affect the choices over here at all. The choice for a firm over here is between complying versus partially evading. The costs and benefits here have nothing to do with where the threshold bites up here. Where the threshold bites is over here. These choices are where it matters. So changing the threshold will not affect this boundary at all. Therefore, it will not affect the division between formality and informality as is seen as an aggregate. But changing the VAT type threshold leaves aggregate informality the measure unchanged. I've just shown you that but aggregate informality is all of that. The threshold is over here somewhere. It doesn't affect this balance at all. So changing the threshold does not reduce informality. It doesn't change measured informality at all. But obviously it has really economic consequences. Why? Because it affects these, the composition over here. Some of these firms will now, the incentives to hide below or hide above are going to change. And also some of the, it may spill over into some of these categories. So there are real economic consequences of changing the threshold which is not captured by our standard measure of formality or informality. And that's the general generic point that I want to get across and there's a lot of technical stuff that we do and so on that an aggregate target of reducing informality is analytically wrong and that leads to huge policy errors. Okay. Let me now give you another example, another type of issue. Bringing together the labor regulation and the tax policy issue. Of course most firms face not just tax thing, they face labor regulations. And in fact, they face many different labor regulations. So suppose we have multiple regulations, a tax based system of regulations and a labor system based on regulations. So firms now face two choices. Those five categories are now multiplied by five. Actually it's five times five, it's not five plus five, it's five times five because you have to decide am I going to comply with this, comply with that? It either and neither both at each of these levels. That's how you have to set down the technical problem when you have two sets of regulations. A firm's problem is where to lie relative to each regime and it's a joint problem that the firm faces. How do you then define formality and informality? Is an informal firm which complies with the tax regulation but not with the whatever is one non-compliance in a set of regulation does that make the firm informal? Is it the union of all the non-compliances or is it the intersection of the non-compliances? See, we haven't thought this thing through. We haven't thought about it at all in terms of what actually constitutes our core definition, conceptual definition of informality. And indeed, Mick Keen and I do an analysis of this multiple regimes, of two tax regimes. You have a VAT regime and an income tax regime and together. And we show that actually you can say sensible things. You can say sensible things about choosing the threshold on this versus choosing the threshold on this. That's a question. Will lowering the threshold on this, what will that do to this other thing? Because it may lead to some changes in terms of firms complying or not complying on this side. So combining these two, you can indeed say sensible things about where the threshold should be chosen but it has nothing to do. Nothing to do at all with reducing the total level of informality. That's it. No, it's finished. So the conclusion, informality is not going away anytime soon as Imran and Martin mentioned. The term informality is not going away anytime soon either. However, I think we have to be clear about the concept and the definition. And there's a lot of looseness, a lot of looseness in the literature. And especially in the context of policy, we have to be very, very clear and analytically rigorous. And our basic point is that an aggregative concept and measure of informality, of course, captures some aspects of reality but it obscures more than it reveals. Thank you very much.