THE IMPACT OF THE INFORMAL
ECONOMY ON ECONOMIC
DIVERSIFICATION IN SMALL STATES –
THE BVI PERSPECTIVE
Hon. Marlon A. Penn - MP
British Virgin Islands
CLASSIC DEFINITION OF INFORMAL ECONOMY
“The term “Informal Economy” thus
refers to all economic activities by
workers and economic units that are
– in law or in practice – not covered
or insufficiently covered by formal
arrangements.”
BVI’S INFORMAL ECONOMY

Unregulated/Legal Activity
Tourism related businesses/Jobs
 Construction Jobs


Undocumented /Illegal Activity
Gambling
 Prostitution
 Sale of Illicit Drugs

SNAP SHOT OF BVI’S ECONOMY
Population of Approximately 27,000
 Mainly Service Based Economy

Financial Services
 Tourism
 Construction Activity

Labour Force 13,000
 GDP of $951,823
 Per Capita $38,500

INFORMAL ECONOMY’S IMPACT ON
ECONOMIC DIVERSIFICATION

Conclude that the Informal Economy’s Impact to
Economic Diversification is Negligible or has
more of an Adverse Impact on the Formal
Economy.

Contributing Factors
Amount of Persons operating in the Informal Sector is small
 Tax System (Payroll Tax system, first $10,000 exempt)
 Gambling (The Purchase of Lottery Tickets)
 Sale of Illicit Drugs (Especially Marijuana which is mostly
used for recreational proposes)

THE POLICY MAKER’S PERSPECTIVE

A more coordinated effort for the collection of
data on the informal economy is needed, to
understand the true impact of this sector to the
formal economy.
Thank You