This study aimed to identify the reasons that lead to the growth of the phenomenon of the shadow economy, and to estimate its size between the years (2000-2021), and its impact on tax revenues in Palestine. The quantitative approach was used to analyse the annual data of the variables, using the MIMIC Model. The study concluded that the size of the shadow economy in Palestine between the years (2000-2021) was (44.45%) of the gross domestic product, and that there is a negative impact of the shadow economy activities on the tax revenues. A legal framework must be provided to makes it contribute positively to the gross domestic product and national income, and increase investment projects in Palestine that lead to increasing job opportunities and reducing unemployment, which positively affects reducing the size of the shadow economy in Palestine.
Keywords: Direct Taxes, Shadow Economy, indirect taxes., tax revenues
