Blogging and the Underground Economy

Recently, I’ve written a couple of articles relating to blogging and finance. Here on Performancing, I thought about how bloggers prove their income or revenue streams when banks and other entities require these. On the Blog Herald, I tried to compute for the monthly cost of my blogging activities, which supposedly accounts for electricity expenses, software, hardware, and other related costs.

I write about these as a blogger and also as an economist. With the popularity of blogging, writing, blog design, and other online-based freelance work and businesses, I sometimes wonder what percentage of the online workforce and industry are part of the informal sector. In other words, I wonder how many online professionals actually pay taxes. Being part of the informal sector essentially means you’re working underground, and under the taxman’s radar.

I tried to bring up the question of blogging and taxation in an earlier post here on Performancing, and it seems most take care of their tax payments in some way or another. Most of us probably pay taxes as professionals, self-employed individuals or small business proprietors. In some places, the informal sector is actually seen as a big part of the economy’s workforce, which actually bolsters economic activity in the light of the global financial crunch (although these studies focus more on micro-businesses and less on the technology worker aspect of the underground economy). Perhaps with better figures about how much bloggers, designers, and freelance writers are earning, we can figure out how much we are contributing to the economy, and how much we are supporting our respective governments in terms of internal revenue collection.

In the end, I would agree with the adage that only two things are sure in life: death and taxes. Whether you pay direct taxes or not, you still pay duties in the form of indirect taxes, such as sales taxes, value added taxes, and the like. So if you earn from your online activities, but don’t declare these as part of your income, you still pay part of your online expenditures as taxes.

Do you pay direct taxes as an online professional? I’m interested to know. If so, what percentage of your blogging (or other) income do you pay? And how do you declare your income source and your status as a taxpayer?

And if you don’t pay your taxes directly, what would convince you to do so? Better benefits and protection from your government? Recognition as a professional in your field?

Don’t worry, if you’d rather not disclose your identity, you can always comment anonymously.