Subject Whereas it is necessary to finance various government programs and preserve fiscal sustainability in Russia, various countries amend their fiscal policies. Currently tax revenue of budgets is increased by reducing the non-observed economy more often, since the existing taxes or new taxes are not always practicable and feasible. Objectives The research analyzes the sector of non-observed economy of the Russian Federation and possibilities to improve tax collectibility through the sector reduction. Methods The first part of the article classifies non-observed economy and highlights differences of separate segments. The second part overviews data on hidden income in the Russian Federation to make approximate estimation of possible revenue from withholding tax. Results Upon the analysis, I determined key segments of non-observed economy and possible measures in relation to each component. The article also indicates economic sectors of the Russian Federation with the highest and lowest percentage of hidden income and amounts of income per sector, estimating possible revenue from withholding tax. Conclusions and Relevance Segments of non-observed economy include hidden production, illegal production, production in the informal sector, households' production for their own consumption and unaccounted production. To increase fiscal revenue of budgets, there should be measures to legitimize the segment of hidden economy and make it an official sector.
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