This paper examines the interrelationship between tax evasion, capital flight and the expansion of the parallel economy, emphasizing how institutional weaknesses enable illicit financial flows. It argues that ineffective tax administration, corruption, regulatory loopholes and lack of transparency create conditions that facilitate the concealment and transfer of untaxed wealth across borders. The study analyzes the economic and governance consequences, including revenue loss, inequality and weakened public institutions. It further evaluates domestic and international policy responses, highlighting the need for stronger enforcement, digital monitoring and global cooperation. The paper concludes by proposing reforms aimed at enhancing institutional capacity and ensuring sustainable economic governance....
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