PUBLIC PERCEPTION OF GOVERNMENT EFFORTS AGAINST THE SHADOW ECONOMY: INSIGHTS FROM COLOMBO DISTRICT, SRI LANKA

Abstract

The shadow economy operates outside official channels, making it difficult for the government to accurately measure its size and impact. This phenomenon significantly undermines tax revenues and economic governance; however, Sri Lanka lacks comprehensive empirical data on citizens' perceptions of initiatives to combat the shadow economy. This study examines the effect of government interventions on reducing shadow economic activities in the Colombo District of Sri Lanka. To conduct this research, an opinion survey was performed using random sampling, gathering data from 150 respondents representing public, semi-government, and private sector employees in the Colombo District. The data were analyzed using SPSS software, applying descriptive statistics, correlation, and regression analysis to derive empirical insights. The results revealed that government intervention significantly reduces activities within the shadow economy in this area. Respondents expressed a strong belief that existing regulations and financial incentives play a key role in decreasing the size of shadow economic activities. However, their confidence in tax policies and enforcement measures was noticeably lower and insignificant. The findings of this study can serve as a valuable reference for regional policymakers when evaluating the effectiveness of current practices and regulations, as well as for adjusting strategies to control the shadow economy in the Colombo District.