Study on the effectiveness of policies to tackle undeclared work : final report.
Date: 2023-07-26
Institutions: Directorate-General for Employment, Social Affairs and Inclusion
Subjects: EU Member State, economic consequence, employment policy, employment statistics, fraud, labour inspectorate, moonlighting, tax collection, underground economy

Study on the effectiveness of 
policies to tackle undeclared work 
(VT/2021/0380) 
Final Report 

 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Employment, Social Affairs and Inclusion 

Directorate Labour Mobility and International Affairs 

Unit E.1, Labour Mobility, Public Employment Services, ELA 

E-mail:  EMPL-E1-unit@ec.europa.eu 
European Commission 
B-1049 Brussels 

 
 
 
EUROPEAN COMMISSION 

Study on the effectiveness of 
policies to tackle undeclared work 
(VT/2021/0380) 
Final Report 

Directorate-General for Employment, Social Affairs and Inclusion 

 
 
 
 
 
Manuscript completed in July, 2022. 

Revised edition of June 2023. 

This study was written by Helen Quaresma (ICF), Caroline Euler (ICF), Ivona, Koronthalyova (ICF), Robert Thornton-Lee 
(ICF), Ioana Alexandra Horodnic (Faculty of Economics and Business Administration "Alexandru Ioan Cuza" University of 
Iași), Josip Franic (Institute of Public Finance, Croatia), Chris Thoung and Luca Barbieri from Cambridge Econometrix. The 
report has been reviewed and supervised by Ruslan Stefanov (CSD) and Anette Scorpetta (European Centre for Social 
Welfare Policy and Research). The study team is thankful to earlier revisions and comments from Erich Kirchler (University 
of Vienna).  

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ISBN 978-92-68-05364-5 

doi: 10.2767/065213 

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EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Table of Contents 

Executive summary .............................................................................................. 7 

Zusammenfassung ............................................................................................. 12 

Résumé ............................................................................................................... 18 

1 

Introduction .................................................................................................. 23 

1.1  Study objective and design ...................................................................... 23 
1.2  Structure of the report .............................................................................. 28 

2  Understanding the characteristics of types of undeclared work  

and their possible drivers ............................................................................ 29 

2.1  Types of undeclared work and policy implications ................................... 29 
2.2  Drivers of undeclared work ...................................................................... 39 

3  Overview of recent estimates of the volume of undeclared work  

and scale of damage created ...................................................................... 51 

3.1  Overview of estimates of volume of undeclared work in contemporary 

research .................................................................................................. 51 

3.2  Estimated economic damage created by undeclared work in EU  

countries .................................................................................................. 55 

4  Synthesis of types of policies implemented by Member States  

and their effectiveness in tackling undeclared work ................................. 66 

4.1  Distributions of key variables ................................................................... 68 
4.2  Cross-analysis and associated recommendations ................................... 71 
4.3  When are interventions effective?............................................................ 80 
4.4  Evidence of policy combinations to effectively tackle undeclared work ... 84 

5  Needs for future research ............................................................................ 87 

6  Conclusions and recommendations ........................................................... 88 

6.1  Evidence on the types of undeclared work and their possible  

determinants ........................................................................................... 88 
6.2  Volume of undeclared work and damage for the EU economy ................ 90 
6.3  Evidence of policies effectively tackling undeclared work ........................ 91 

References .......................................................................................................... 93 

5 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

6 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Executive summary 

Introduction 

The European Commission broadly defines  undeclared work as "any paid activities that 
are lawful as regards their nature, but not declared to public authorities”. Undeclared work 
has  important  economic  and  social  implications,  including  the  loss  of  social  security 
contributions and taxes, but also higher incidence of work accidents, missed professional 
development  opportunities  for  workers,  unfair  competition  and  market  distortions  for 
businesses,  among  others.  The  European  Union  (EU)  has  set  a  target  of  a  78% 
employment  rate  of  the  population  aged  20  to  64  by  2030  (European  Pillar  of  Social 
Rights). Tackling undeclared work can contribute to this target by creating more declared 
work.  

In this context, the European Commission launched this study to gather deeper insights 
into,  and  empirical  evidence  of,  successful  policies  and  policy  combinations  for 
tackling undeclared work. This study reviewed empirical evidence across the full range 
indirect  policy  measures,  including  their  potential  effectiveness  in 
of  direct  and 
transforming  undeclared  work  into  declared  work.  The  idea  was  to  identify  the  most 
effective  policies  for  reducing  the  volume  of  undeclared  work  and  linked  damages 
depending on the type of undeclared work, the target groups (drivers) and/or geographical 
specificities.  

Methodology 

The  study  implemented  a  meta-evaluation  of  studies  on  the  types  and  drivers  of 
undeclared  work  to  determine  their  impact  on  policy  instruments  and  on  the  scale  of 
undeclared  work.  The  study  implemented  a  meta-evaluation  of  the  recommendations 
regarding effectiveness of policies tackling undeclared work. The scope of the study was 
the  past  20  years.  The  focus  was  on  the  27  EU  Member  States  (EU-27),  as  well  as 
evidence  gathered  from  developed  countries  or  the  Organisation  of  Economic  Co-
operation and Development (OECD) member countries more broadly. 

Findings 

Definitions and undeclared work types 

The study’s aim was to review studies regarding definitions, types and characteristics 
of undeclared work and their possible drivers: 

  The 

literature  covers  only  broad  types  of  undeclared  work, 

including 
unregistered employment, under-declared employment (envelope wages and other 
forms  of  hiding  the  true/full  duration  or  remuneration  of  the  employment), 
unregistered self-employment and bogus self-employment.  

  A  review  of  legal  frameworks  demonstrates  that  these  focus  on  penalties  and 
sanctions and refer largely to the same broad types of undeclared work. To note in 
this  context  is  that  penalties  for  undeclared  work  (labour  law  infringements,  non-
payment of social security) are part of a different type of legislation than penalties 
for  non-payment  of 
frameworks  are 
these 
complementary, or contradictory has not been evidenced.  

taxes.  To  what  extent 

legal 

 

Important evidence gaps persist with regard to the characteristics of the types of 
undeclared  work.  For  example,  current  categories  do  not  provide  enough 
information  on  how  more  complex  forms  of  undeclared  work  such  as  sub-
contracting chains or platform work can be clustered within this typology. 

7 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

  Another limitation of the typology is that current definitions focus primarily on fiscal 
or financial motivations to  engage  in  undeclared  work (to  evade  taxes  or social 
security  payments)  but  less  on  others  such  as  participation  in  society  (by 
working), absence of affordable quality state services (e.g. elderly care), debt traps, 
lack of opportunities, or promotion of social solidarity and exchange. Re-focussing 
the  typology  on  the  latter  types  of  motivations  would  allow  to  focus  policy 
interventions  in  a  more  comprehensive  way  on  measures  that  can  improve  tax 
morale (as an important driver of undeclared work).  

  Limitations of the current typology of undeclared work could be overcome if policy 
approaches  considered  a  more  local  typology,  clustering  undeclared  work  types 
adding  in  country/regional  specific  drivers  or  risk  profiles  (for  example  focus  on 
most common forms of undeclared work specific for the region, national level and 
their  drivers)  ,  as  well  as    vulnerability  (for  example  specific  groups  that  need 
specific attention or protection) This can be supplemented by ranking the severity 
of undeclared work types. When developing targeted policy measures, it could be 
useful  to  differentiate  the  responsibilities  of  all  stakeholders  including  users, 
facilitators,  and  advertisers,  as  well  as  the  driver  tackled.  It  may  also  give  more 
visibility to the policy mix achieving the best results.  

Drivers  

The  study  sought  to  identify  drivers  and  determinants  that  lead  to  participation  in 
undeclared work and connect these to the identified types of undeclared work to provide a 
better overview of the range of policies tackling each type of undeclared work.  

 

Insights on how socio-economic characteristics impact on undeclared work more in 
general:  age  and  gender  correlate  with  the  occurrence  of  undeclared  work. 
Regarding  age,  the  evidence  suggests  that  the  older  the  individual  the  lower  the 
potential to engage in undeclared work. At the same time individuals are influenced 
by their life experience in their age category meaning that engaging in undeclared 
work  is  possible  at  any  age.  Gender  has  a  direct  and  indirect  effect  on  the 
occurrence  of  undeclared  work.  There  is  a  higher  probability  that  men  engage  in 
under-declared  work.  For  education,  no  clear  general  link  was  established  to 
correlate  with  the  occurrence  of  undeclared  work.  Concerning  business  specific 
drivers, evidence indicates that undeclared work is more prevalent in small and 
micro companies. In terms of sectoral area, undeclared work is more prevalent in 
businesses operating in agriculture and construction.  

  The  available  literature  provides  few  insights  or  firm  conclusions  on  how  socio-
demographic  characteristics  impact  specific  types  of  undeclared  work.  Despite 
this,  a  few  pointers  could  be  of  interest  regarding  the  development  of  effective 
policies: gender is not a significant factor for unregistered employment; and bogus 
self-employment might be more prevalent among highly educated individuals than 
among unskilled individuals. Unfortunately, little evidence was identified in relation 
to household size and size of settlement (rural/urban).  

 

In  relation  to  economic  and  wider  systemic  drivers  of  undeclared  work,  the 
question of whether the tax burden impacts the scale of undeclared work cannot 
be empirically demonstrated.  

  Analysis  highlights  the  insignificance  of  the  share  of  the  migrant  population  on 
the  size  of  the  undeclared  economy  and  rather  points  to  the  lack  of  financial 
resources in general as an important factor  encouraging workers to engage  in 
undeclared  work.  Although  some  labour  suppliers  participate  in  undeclared  work 
out of necessity, many do so simply to defy the authorities and/or to increase their 
wealth.  Dissatisfaction with the work of public administration, distrust in the 
authorities, and low tax morale are the most important motivators.  

8 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

  There  is  a  gap  in  the  literature  in  respect  of  other  systemic  drivers,  which 
prevent  conclusions  being  drawn  on  the  role  of  corruption,  money  laundering, 
repression,  rule  of  law,  ease  of  doing  business,  quality  of  social  security,  the 
viability  of  the  pension  system,  and  other  country-specific  factors  as  likely 
determinants of undeclared work.  

Scale / volume 

The  study  summarises  the  research  on  the  most  recent  estimates  of  the  size  of 
undeclared work.  

  Current  empirical  evidence  on  the  scale  and  dynamics  of  undeclared  work  is 

difficult to attribute to policy success.  

  Studies  use  a  variety  of  methods  and  mathematical  calculations  to  estimate 
undeclared work. Most frequently, the share of undeclared work is expressed as a 
share  (percentage)  of  the  working  population,  and 
then  as  a  share 
(percentage) of GDP. However, due to the complex (hidden) nature of undeclared 
work,  other  studies  use  other  methods  of  estimation,  limiting  the  potential  to 
compare results and to identify trends of undeclared work in EU Member States 
over time.  

  For  2017,  a study  estimated that the  average  size of the  shadow  economy  in the 
EU-27  was  16.3%  of  GDP  at  market  prices  (current  prices).  Another  study 
estimated  that,  in  2019,  the  share  of  undeclared  work  averaged  14.8%  of  gross 
value  added  (GVA)  in  the  EU-27.  Estimates  suggest  that  the  shadow  economy 
and the share of undeclared work in the EU-27 shrunk over the period 2013- 2023.  

  Regarding specific types of undeclared work, estimates on volume exist only 
for  under-declared  work  or  envelope  wages,  as  well  as  more  broadly  in 
employment relationships. Data indicates a trend of under-declared employment as 
the most prevalent form of undeclared work in the EU.  

  An agreed approach to estimate undeclared work on a continuous basis would be 
preferential  at  EU  level  to  continue  to  monitor  volume  and  provide  a  comparative 
basis.  

Damage  

The  study  presents  evidence  on  the  damage  caused  by  undeclared  work  in  view  of 
identifying the policies that may need to be prioritised to reduce the most damaging forms 
of undeclared work.  

  The existing research concentrates on the economic damage to society more 
broadly without specifically estimating such damage or ranking the most damaging 
characteristics of undeclared work.  

  The damage created by undeclared work1 is estimated to represent 6.5% of total 
government spending for the EU-27 (based on 2019 data). Of the 6.5% total tax 
revenue  loss  (or  EUR  425 279  million),  4.1%  was  within  an  employment 
relationship,  2.4%  was caused  by undeclared  work carried  out  by  self-employed 
persons  and  only  0.1%  by  undeclared  work  of  family  workers  (with  important 
country variations).  

1  Based  on  the  estimated  value  of  undeclared  work  (estimated  in  2019  14.3%  of  GVA),  the  total  tax  revenue  lost  was 
examined  and  the  tax  lost  (i.e.  taxes  on  income  and  labour-related  social  contributions)  was  then  calculated  as  a 
percentage of government spending.  

9 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

  The damage of the shadow economy more broadly (equivalent to 16.3% of EU-
27 GDP in 2017) based on the total lost tax revenue can be estimated as 13.9% 
of total government spending (lost government revenue of EUR 850 427 million). 

  The  study  highlights  that  the  societal  damage  of  undeclared  work  and  the 
shadow economy is estimated to be significant, even by the limited measures 
used for its estimation.  

  The focus of policies should be on the most damaging forms of undeclared work for 
society  more  broadly,  protecting  those  individuals  that  are  most  vulnerable, 
transforming their un/under-declared work situation into a declared one. 

Policy interventions to tackle undeclared work 

The study identifies the type of policy interventions that are sought by EU Member States 
most commonly to tackle undeclared work and presents evidence on their effectiveness.  

  Western  Europe  and  Central  and  Eastern  Europe  are  the  most  studied  regions 
in the EU in relation to socio-economic indicators that could affect undeclared work 
and related policies. Typically, ‘tax-compliance’ considerations are more prevalent 
in  Western  Europe,  while  issues  related  to  ‘participation  in  undeclared  work’ 
are  more  important  in  Central  and  Eastern  Europe,  suggesting  different  ways  of 
implementing the policies recommended. 

  Recommended  policy  interventions  tend  to  be  more  general  and  high-level  than 
involving  specific  and  detailed  measures.  ‘Providing  information’  is  the  most 
common recommendation for tackling undeclared work in both regions. Western 
Europe has a wider range of recommendations. Central and Eastern Europe has 
a somewhat higher share of recommendations that fall under the categories 
of  ‘modernise  formal  institutions’  and  ‘tackle  determinants  of  undeclared 
work’, which may be linked to a lower performance in the chosen socio-economic 
indicators.  

  Research  finds  that  enforcement  interventions  demonstrate  a  high  level  of 
effectiveness,  especially  audits  and  inspections.  However,  direct  deterrence 
interventions  need  to  be  carefully  considered  to  ensure  that  they  are  used 
appropriately  and  in  a targeted manner.  A failure to  understand the  context  of  an 
intervention could have the unintended consequence of increasing the level of 
undeclared work or tax non-compliance, as individuals feel unfairly targeted and 
controlled.  

 

Indirect measures play an important role in tackling elements of undeclared work, 
especially those relating to tax non-compliance. Simplifying communication is a 
cost-effective  way  of  increasing  compliance  and  reducing  the  overall  costs  of 
enforcement. 

  Legislative  and  regulatory  changes  are  important  in  tackling  undeclared  work. 
Legislative options need to be carefully balanced to ensure that they enact positive 
change.  Otherwise,  they  could  create  adverse  situations  where  social  and  legal 
norms are not synchronised. 

Recommended policy mixes to effectively tackle undeclared work as identified in 
research 

By  reviewing  empirical  evidence,  the  study  identifies  policy  combinations  that  could 
contribute to a holistic framework for tackling each type of undeclared work. This evidence 
can be used at Member State level for policy design. 

  Evidence  suggests  not  relying  solely  on  enforcement,  incentives,  or  indirect 
interventions  when  tackling  undeclared  work.  Evidence  confirms  the  need  to 

10 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

develop policy approaches that are locally/regionally contextualised and responsive 
to  the  targeted  type  of  undeclared  work.  This  supports  the  idea  that  a  holistic 
approach to tackle undeclared work is important. 

  Enforcement  interventions  need  a  strategy  that  combines  other  interventions 
to be considered optimal, such as increasing levels of public awareness around tax 
compliance requirements, a combination of audit and penalty reminder letters sent 
to  self-reporting  individuals,  the  need  to  take  indirect  revenue  into  account  when 
appraising  the  usefulness  of  an  audit  to  ensure  cost-effectiveness,  and  the 
inclusion  of  social  norms  messaging  to  appeal  to  individuals’  sense  of  moral 
obligation.  

  However,  where  the  underlying  tax  morale  within  a  society  is  deemed  low, 
increasing enforcement efforts will have a marginal effect. Instead, more emphasis 
needs  to  be  placed  on  responding  to  the  underlying  issues  driving  that  low  tax 
morale.  Evidence  is  clear  that  ‘purely  relying  on  deterrence  without  considering 
social  norms  is  probably  an  insufficient  response  to  increasing  levels  of  non-
compliance’.  

11 

 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Zusammenfassung 

Einleitung 

Die  Europäische  Kommission  definiert  nicht  angemeldete  Erwerbstätigkeit 
(Schwarzarbeit) als "jede bezahlte Tätigkeit, die ihrer Art  nach rechtmäßig  ist, aber den 
Behörden  nicht  gemeldet  wird".  Nicht  angemeldete  Erwerbstätigkeit  hat  erhebliche 
wirtschaftliche  und  soziale  Auswirkungen,  unter  anderem  den  Verlust  von  Sozial-
versicherungsbeiträgen  und  Steuern,  aber  auch  eine  höhere  Zahl  von  Arbeitsunfällen, 
verpasste berufliche Entwicklungsmöglichkeiten für Arbeitnehmer, unlauteren Wettbewerb 
und  Marktverzerrungen  für  Unternehmen.  Die  Europäische  Union  (EU)  hat  sich  das  Ziel 
gesetzt, bis 2030 eine Beschäftigungsquote von 78% der Bevölkerung im Alter von 20 bis 
64  Jahren  zu  erreichen  (Europäische  Säule  sozialer  Rechte).  Die  Bekämpfung  der  nicht 
angemeldeten Erwerbstätigkeit kann zu diesem Ziel beitragen, indem mehr angemeldete 
Arbeitsplätze geschaffen werden.  

Vor  diesem  Hintergrund  hat  die  Europäische  Kommission  diese  Studie  in  Auftrag 
gegeben, um tiefere Einblicke in und empirische Belege für erfolgreiche Maßnahmen 
und  Maßnahmenkombinationen  zur  Bekämpfung  der  nicht  angemeldeten 
Erwerbstätigkeit  zu  gewinnen.  In  dieser  Studie  wurden  empirische  Belege  für  die 
gesamte  Bandbreite  direkter  und 
indirekter  politischer  Maßnahmen  untersucht, 
einschließlich ihrer potenziellen Wirksamkeit bei der Umwandlung von nicht angemeldeter 
in angemeldete Erwerbstätigkeit. Ziel war es, die wirksamsten politischen Maßnahmen zur 
Verringerung  des  Umfangs  der  Schwarzarbeit  und  der  damit  verbundenen  Schäden  in 
Abhängigkeit  von  der  Art  der  nicht  angemeldeten  Erwerbstätigkeit,  der  Zielgruppen 
(Treibern) und/oder den geografischen Besonderheiten zu ermitteln.   

Methodik 

Im  Rahmen  der  Studie  wurde  eine  Meta-Evaluierung  von  Studien  über  die  Arten  und 
Triebkräfte  der  nicht  angemeldeten  Erwerbstätigkeit  durchgeführt,  um  deren 
Auswirkungen  auf  politische  Instrumente  und  das  Ausmaß  der  nicht  angemeldeten 
Erwerbstätigkeit zu ermitteln. Außerdem wurde eine Meta-Evaluierung der Empfehlungen 
zur  Wirksamkeit  der  politischen  Maßnahmen  zur  Bekämpfung  der  nicht  angemeldeten 
Erwerbstätigkeit  durchgeführt.  Die  Studie  bezog  sich  auf  die  letzten  20  Jahre.  Der 
Schwerpunkt  lag  auf  den  27  EU-Mitgliedstaaten  (EU-27),  sowie  auf  den  Erkenntnissen 
aus  den  Industrieländern  und  den  Mitgliedstaaten  der  Organisation  für  wirtschaftliche 
Zusammenarbeit und Entwicklung (OECD). 

Erkenntnisse 

Definitionen und Arten nicht angemeldeter Erwerbstätigkeit 

Ziel  der  Studie  war  es,  Studien  zu  Definitionen,  Arten  und  Merkmalen  von  nicht 
angemeldeter Erwerbstätigkeit und deren möglichen Ursachen auszuwerten: 

 

In  der  Literatur  werden  nur  weit  gefasste  Arten  der  Schwarzarbeit  behandelt, 
darunter  nicht  angemeldete  Beschäftigung,  nicht  vollumfänglich  angemeldete 
Beschäftigung  (Umschlaglöhne  und  andere  Formen  der  Verschleierung  der 
wahren/vollständigen  Dauer  oder  des  Entgelts  der  Beschäftigung),  nicht 
angemeldete Selbständigkeit und Scheinselbständigkeit.  

  Eine  Überprüfung  der  rechtlichen  Rahmenbedingungen  zeigt,  dass  diese  sich 
auf  Strafen  und  Sanktionen  konzentrieren  und  sich  weitgehend  auf  die  gleichen 
weit gefassten Arten von nicht angemeldeter Erwerbstätigkeit beziehen. In diesem 
für  nicht  angemeldete 
Zusammenhang 

ist  anzumerken,  dass  Sanktionen 

12 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

(Verstöße  gegen  das  Arbeitsrecht,  Nichtzahlung 

Erwerbstätigkeit 
von 
Sozialversicherungsbeiträgen)  Teil  einer  anderen  Art  von  Rechtsvorschriften  sind 
als  Sanktionen 
Inwieweit  sich  diese 
für  die  Nichtzahlung  von  Steuern. 
Rechtsrahmen ergänzen oder widersprechen, ist nicht nachgewiesen worden.  

  Hinsichtlich der Merkmale der nicht angemeldeten Erwerbstätigkeit bestehen nach 
wie  vor  große  Wissenslücken.  So  liefern  die  derzeitigen  Kategorien  beispiels-
weise nicht genügend Informationen darüber, wie  komplexere Formen der nicht 
angemeldeten  Erwerbstätigkeit  wie  Subunternehmerketten  oder  Plattformarbeit 
in diese Typologie eingeordnet werden können. 

  Eine weitere Einschränkung der Typologie besteht darin, dass sich die derzeitigen 
Definitionen  in  erster  Linie  auf  steuerliche  oder  finanzielle  Beweggründe  für 
nicht  angemeldete  Erwerbstätigkeit  konzentrieren  (um  Steuern  oder  Sozial-
versicherungszahlungen  zu  hinterziehen)  und  weniger  auf  andere  Gründe  wie 
gesellschaftliche Teilhabe (durch Arbeit), das Fehlen erschwinglicher, hochwertiger 
staatlicher  Dienstleistungen  (z.  B.  Altenpflege),  Schuldenfallen,  mangelnde 
Chancen oder die Förderung von sozialer Solidarität und sozialem Austausch. Eine 
Neuausrichtung  der  Typologie  auf  die  letztgenannten  Motivationsarten  würde  es 
ermöglichen,  politische 
Interventionen  umfassender  auf  Maßnahmen  zu 
konzentrieren, die die Steuermoral (als wichtige Triebkraft der nicht angemeldeten 
Erwerbstätigkeit) verbessern können.   

  Die  Grenzen  der  derzeitigen  Typologie  der  nicht  angemeldeten  Erwerbstätigkeit 
könnten  überwunden  werden,  wenn  politische  Ansätze  eine  stärker 
lokal 
ausgerichtete  Typologie  berücksichtigen  würden,  bei  der  die  Arten  der  nicht 
angemeldeten  Erwerbstätigkeit  geclustert  und  länder-  bzw.  regionalspezifische 
Ursachen  oder  Risikoprofile  hinzugefügt  werden  (z.  B.  Konzentration  auf  die 
häufigsten  Formen  der  nicht  angemeldeten  Erwerbstätigkeit  auf  regionaler  oder 
nationaler  Ebene  und  ihre  Ursachen),  sowie  auf  die  Anfälligkeit  (z.  B.  bestimmte 
Gruppen, die besondere Aufmerksamkeit oder besonderen Schutz benötigen). Bei 
der  Entwicklung  gezielter  politischer  Maßnahmen  könnte  es  sinnvoll  sein,  die 
Zuständigkeiten  aller  Beteiligten,  einschließlich  der  Nutzer,  Vermittler  und 
Werbetreibenden,  sowie  die  zu  bekämpfenden  Faktoren  zu  differenzieren.  Auf 
diese Weise könnte auch der Policy-Mix, der die besten Ergebnisse erzielt, besser 
sichtbar gemacht werden.  

Ursachen 

Im Rahmen der Studie sollten die Triebkräfte und Determinanten ermittelt werden, die zur 
Beteiligung  an  nicht  angemeldeter  Erwerbstätigkeit führen,  und  diese  mit  den  ermittelten 
Arten  nicht  angemeldeter  Erwerbstätigkeit  in  Verbindung  gebracht  werden,  um  einen 
besseren  Überblick  über  das  Spektrum  der  Maßnahmen  zur  Bekämpfung  der  einzelnen 
Arten von nicht angemeldeter Erwerbstätigkeit zu erhalten.  

  Erkenntnisse  darüber,  wie  sich  sozioökonomische  Merkmale  auf  die  nicht 
angemeldete  Erwerbstätigkeit  im  Allgemeinen  auswirken:  Alter  und  Geschlecht 
korrelieren mit dem Auftreten von nicht angemeldeter Erwerbstätigkeit. Was 
das  Alter  betrifft,  so  deuten  die  Ergebnisse  darauf  hin,  dass  das  Potenzial,  nicht 
angemeldete Erwerbstätigkeit auszuüben, umso geringer ist, je älter die Person ist. 
Gleichzeitig  wird  der  Einzelne  durch  seine  Lebenserfahrung 
in  seiner 
Alterskategorie  beeinflusst,  was  bedeutet,  dass  Schwarzarbeit  in  jedem  Alter 
möglich  ist.  Das  Geschlecht  wirkt  sich  direkt  und  indirekt  auf  das  Auftreten  von 
nicht  angemeldeter  Erwerbstätigkeit  aus.  Die  Wahrscheinlichkeit,  dass  Männer 
nicht  angemeldete  Arbeit  verrichten,  ist  höher.  Für  die  Bildung  wurde  kein 
eindeutiger allgemeiner Zusammenhang mit dem Auftreten von nicht angemeldeter 
Erwerbstätigkeit  festgestellt.  Was  die  unternehmensspezifischen  Faktoren  betrifft, 

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so  gibt  es  Hinweise darauf,  dass  nicht angemeldete  Erwerbstätigkeit  in  Klein- 
und Kleinstunternehmen häufiger vorkommt. Was den Sektor betrifft, so ist die 
nicht  angemeldete  Erwerbstätigkeit  in  Unternehmen,  die  in  der  Landwirtschaft 
und im Baugewerbe tätig sind, stärker ausgeprägt.  

  Die verfügbare Literatur bietet nur wenige Einblicke oder eindeutige Schlussfolge-
rungen darüber, wie sich soziodemografische Merkmale auf bestimmte Arten der 
nicht  angemeldeten  Erwerbstätigkeit  auswirken.  Dennoch  könnten  einige 
Hinweise  für  die  Entwicklung  wirksamer  politischer  Maßnahmen  von  Interesse 
sein:  Das  Geschlecht  ist  kein  signifikanter  Faktor  für  die  nicht  angemeldete 
Erwerbstätigkeit,  und  die  Scheinselbstständigkeit  könnte  bei  hochqualifizierten 
Personen stärker verbreitet sein als bei unqualifizierten Personen. Leider wurden 
nur wenige  Belege  in  Bezug  auf  die Haushaltsgröße  und  die  Größe  der  Siedlung 
(ländlich/städtisch) gefunden.  

 

In Bezug auf die wirtschaftlichen und allgemeineren systemischen Ursachen der 
nicht angemeldeten Erwerbstätigkeit lässt sich nicht empirisch nachweisen, ob die 
Steuerbelastung  Auswirkungen  auf  das  Ausmaß  der  nicht  angemeldeten 
Erwerbstätigkeit hat.  

  Die  Analyse  zeigt,  dass  der  Anteil  der  Migranten am  Umfang  der  nicht angemel-
deten  Erwerbstätigkeit  unbedeutend  ist,  und  weist  vielmehr  darauf  hin,  dass  der 
Mangel an finanziellen Mitteln im Allgemeinen ein wichtiger Faktor ist, der die 
Arbeitnehmer  dazu  veranlasst,  nicht  angemeldete  Erwerbstätigkeit  auszuüben. 
Obwohl  einige  Anbieter  von  Arbeitskräften  aus  der  Not  heraus  Schwarzarbeit 
leisten, tun dies viele einfach, um den Behörden zu trotzen und/oder ihr Vermögen 
zu  vermehren.  Unzufriedenheit  mit  der  Arbeit  der  öffentlichen  Verwaltung, 
Misstrauen  gegenüber  den  Behörden  und  eine  niedrige  Steuermoral  sind  die 
wichtigsten Motivatoren.  

  Es gibt eine Lücke in der Literatur in Bezug auf andere systemische Faktoren, 
die  Schlussfolgerungen  über  die  Rolle  von  Korruption,  Geldwäsche,  Repression, 
Rechtsstaatlichkeit,  „ease  of  doing  business“,  Qualität  der  sozialen  Sicherheit, 
Tragfähigkeit  des  Rentensystems  und  andere  länderspezifische  Faktoren  als 
wahrscheinliche  Determinanten  der  nicht  angemeldeten  Erwerbstätigkeit 
verhindern.  

Umfang 

Die  Studie  fasst  die  Forschungsergebnisse  der  jüngsten  Schätzungen  zum  Umfang  der 
nicht angemeldeten Erwerbstätigkeit zusammen.  

  Die derzeitigen empirischen Erkenntnisse über das Ausmaß und die Dynamik der 
nicht  angemeldeten  Erwerbstätigkeit  lassen  sich  nur  schwer  auf  den  Erfolg  der 
Politik zurückführen.  

  Studien  verwenden  eine  Vielzahl  von  Methoden  und  mathematischen 
Berechnungen,  um  die  nicht  angemeldete  Erwerbstätigkeit  zu  schätzen.  Am 
häufigsten  wird  der  Anteil  der  nicht  angemeldeten  Erwerbstätigkeit  als  Anteil 
(Prozentsatz)  an  der  Erwerbsbevölkerung  und  dann  als  Anteil  (Prozentsatz) 
am BIP ausgedrückt. Aufgrund des komplexen (verborgenen) Charakters der nicht 
angemeldeten  Erwerbstätigkeit  werden 
jedoch  andere 
Schätzmethoden  verwendet.  Dies  erschwert  einen  Vergleich  der  Ergebnisse 
und die Ermittlung von Trends bei der nicht angemeldeten Erwerbstätigkeit in den 
EU-Mitgliedstaaten im Laufe der Zeit.  

in  anderen  Studien 

  Für  das  Jahr  2017  schätzte  eine  Studie  die  durchschnittliche  Größe  der 
Schattenwirtschaft  in  der  EU-27  auf  16,3%  des  BIP  zu  Marktpreisen  (aktuelle 
Preise).  Eine  andere  Studie  schätzte,  dass  der  Anteil  der  nicht  angemeldeten 

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Erwerbstätigkeit  im  Jahr  2019  durchschnittlich  14,8%  der  Bruttowertschöpfung 
(BWS)  in  der  EU-27  ausmachte.  Schätzungen  gehen  davon  aus,  dass  die 
Schattenwirtschaft  und  der  Anteil  der  nicht  angemeldeten  Erwerbstätigkeit  in  der 
EU-27 im Zeitraum von 2013 bis 2023 zurückgegangen sind.  

  Was  die  spezifischen  Formen  der  nicht  angemeldeten  Erwerbstätigkeit  betrifft,  so 
gibt es Schätzungen zum Umfang nur für nicht angemeldete Erwerbstätigkeit 
oder  Hüllenlöhne  sowie  für  Beschäftigungsverhältnisse  im  weiteren  Sinne.  Die 
Daten  deuten  darauf  hin,  dass  die  nicht  vollumfänglich  angemeldete  Erwerbs-
tätigkeit die häufigste Form der nicht angemeldeten Erwerbstätigkeit in der EU ist.  

  Ein koordinierter Ansatz  zur kontinuierlichen  Schätzung  der  nicht  angemeldeten 
Erwerbstätigkeit  wäre  auf  EU-Ebene vorzuziehen,  um  deren  Umfang  weiterhin  zu 
überwachen und eine Vergleichsbasis zu schaffen.  

Schaden 

In  der  Studie  werden  Anhaltspunkte  für  die  durch  nicht  angemeldete  Erwerbstätigkeit 
verursachten  Schäden  dargelegt,  um  zu  ermitteln,  welche  politischen  Maßnahmen 
vorrangig  zu  ergreifen  sind,  um  die  schädlichsten  Formen  der  nicht  angemeldeten 
Erwerbstätigkeit einzudämmen.  

  Die 

vorhandenen  Forschungsarbeiten  konzentrieren  sich  auf  den 
wirtschaftlichen  Schaden  für  die  Gesellschaft  im  Allgemeinen,  ohne  diesen 
Schaden  speziell  zu  schätzen  oder  eine  Rangfolge  der  schädlichsten  Merkmale 
der nicht angemeldeten Erwerbstätigkeit aufzustellen.  

  Der  Schaden,  der  durch  nicht  angemeldete  Erwerbstätigkeit2  entsteht,  macht 
schätzungsweise  6,5%  der  gesamten  Staatsausgaben  für  die  EU-27  aus 
(basierend  auf  den  Daten  für  2019).  Von  den  6,5%  Gesamtsteuerausfällen  (oder 
425 279  Mio.  EUR)  entfielen  4,1%  auf  Beschäftigungsverhältnisse,  2,4%  auf 
nicht  angemeldete  Erwerbstätigkeit  von  Selbstständigen  und  nur  0,1%  auf  nicht 
angemeldete  Erwerbstätigkeit  von  mithelfenden  Familienangehörigen 
(mit 
erheblichen länderspezifischen Unterschieden).  

  Der  Schaden  der  Schattenwirtschaft  im  weiteren  Sinne  (entspricht  16,3%  des 
BIP  der  EU-27  im  Jahr  2017)  kann  auf  Grundlage  der  gesamten  entgangenen 
Steuereinnahmen auf 13,9% der gesamten Staatsausgaben geschätzt werden 
(entgangene Staatseinnahmen von 850 427 Mio. EUR).  

  Die  Studie  unterstreicht,  dass  der  gesellschaftliche  Schaden  der  nicht 
angemeldeten  Erwerbstätigkeit  und  der  Schattenwirtschaft  als  erheblich 
eingeschätzt  wird,  selbst  bei  den  limitierten  Maßstäben,  die  für  die  Schätzung 
verwendet wurden.  

  Der  Schwerpunkt  der  politischen  Maßnahmen  sollte  auf  den  für  die  Gesellschaft 
schädlichsten  Formen der nicht angemeldeten Erwerbstätigkeit im weiteren Sinne 
liegen,  indem  die  am  stärksten  gefährdeten  Personen  geschützt  werden  und  ihre 
nicht/unterdeklarierte Arbeitssituation in eine deklarierte umgewandelt wird. 

Politische Maßnahmen zur Bekämpfung der nicht angemeldeten Erwerbstätigkeit  

Die  Studie  ermittelt  die  Art  der  politischen  Maßnahmen,  die  von  den  EU-Mitgliedstaaten 
am  häufigsten  angestrebt  werden,  um  die  nicht  angemeldete  Erwerbstätigkeit  zu 
bekämpfen, und präsentiert Anhaltspunkte für deren Wirksamkeit.   

2 Auf der Grundlage des geschätzten Wertes der nicht angemeldeten Erwerbstätigkeit (im Jahr 2019 schätzungsweise 14,3 
%  der  BWS)  wurden  die  gesamten  entgangenen  Steuereinnahmen  untersucht  und  die  entgangenen  Steuern  (d.  h. 
Einkommensteuern und arbeitsbezogene Sozialbeiträge) als Prozentsatz der Staatsausgaben berechnet.   

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  Westeuropa  sowie  Mittel-  und  Osteuropa  sind  die  am  meisten  untersuchten 
Regionen in  der  EU in Bezug  auf sozioökonomische Indikatoren, die sich auf die 
nicht angemeldete Erwerbstätigkeit und damit verbundene Maßnahmen auswirken 
könnten.  Typischerweise  sind  Überlegungen  zur 
in 
Westeuropa  stärker  ausgeprägt,  während  Fragen  im  Zusammenhang  mit  der 
"Beteiligung an  nicht  angemeldeter  Erwerbstätigkeit"  in  Mittel- und Osteuropa 
eine  größere  Rolle  spielen,  was  auf  unterschiedliche  Wege  zur  Umsetzung  der 
empfohlenen Maßnahmen hindeutet. 

"Steuerkonformität" 

  Die  empfohlenen  politischen  Maßnahmen  sind  eher  allgemeiner  und  überge-
ordneter  Art,  als  dass sie spezifische  und  detaillierte  Maßnahmen  beinhalten.  Die 
häufigste  Empfehlung zur  Bekämpfung der nicht  angemeldeten  Erwerbstätigkeit 
ist  in  beiden  Regionen  die  "Bereitstellung  von  Informationen".  Westeuropa  hat 
ein breiteres Spektrum an Empfehlungen. Mittel- und Osteuropa hat einen etwas 
höheren Anteil an Empfehlungen, die in die Kategorien "Modernisierung der 
formalen  Institutionen"  und  "Bekämpfung  der  Determinanten  der  nicht 
angemeldeten  Erwerbstätigkeit"  fallen,  was  mit  einer  geringeren  Leistung  bei 
den ausgewählten sozioökonomischen Indikatoren zusammenhängen könnte.  

  Die Forschung zeigt, dass Durchsetzungsmaßnahmen, insbesondere Audits und 
Inspektionen, ein hohes Maß an Wirksamkeit aufweisen. Direkte Abschreckungs-
maßnahmen  müssen  jedoch  sorgfältig  geprüft  werden,  um  sicherzustellen, 
dass sie angemessen und zielgerichtet eingesetzt werden. Wenn der Kontext einer 
Intervention nicht verstanden wird, könnte dies die unbeabsichtigte Folge haben, 
dass  das  Ausmaß  der  nicht  angemeldeten  Erwerbstätigkeit  oder  der 
Nichteinhaltung  von  Steuervorschriften  zunimmt,  da  sich  der  Einzelne 
ungerechtfertigt ins Visier genommen und kontrolliert fühlt.  

 

Indirekte  Maßnahmen  spielen  eine  wichtige  Rolle  bei  der  Bekämpfung  von 
Elementen der nicht angemeldeten Erwerbstätigkeit, insbesondere im Zusammen-
hang  mit  der  Nichteinhaltung  von  Steuervorschriften.  Die  Vereinfachung  der 
Kommunikation ist ein kosteneffizienter Weg, um die Einhaltung der Vorschriften 
zu verbessern und die Gesamtkosten der Durchsetzung zu senken.  

  Änderungen  von  Gesetzen  und  Vorschriften  sind  wichtig,  um  die  nicht 
angemeldete  Erwerbstätigkeit  zu  bekämpfen.  Legislative  Optionen  müssen 
sorgfältig abgewogen werden, um sicherzustellen, dass sie einen positiven Wandel 
bewirken.  Andernfalls  könnten  sie  zu  ungünstigen  Situationen  führen,  in  denen 
soziale und rechtliche Normen nicht aufeinander abgestimmt sind. 

Empfohlener Policy-Mix zur wirksamen Bekämpfung der nicht angemeldeten 
Erwerbstätigkeit gemäß den Forschungsergebnissen 

Durch  die  Überprüfung  der  empirischen  Erkenntnisse  werden 
in  der  Studie 
Maßnahmenkombinationen  ermittelt,  die  zu  einem  ganzheitlichen  Rahmen  für  die 
Bekämpfung jeder Art von  nicht angemeldeter Erwerbstätigkeit beitragen könnten. Diese 
Erkenntnisse können auf Ebene der Mitgliedstaaten für die Gestaltung der Politik genutzt 
werden. 

  Es  gibt  Hinweise  darauf,  dass  man  sich  bei  der  Bekämpfung  der  nicht 
angemeldeten  Erwerbstätigkeit  nicht  allein  auf  Durchsetzung,  Anreize  oder 
indirekte  Interventionen  verlassen  sollte.  Die  Erkenntnisse  bestätigen  die 
Notwendigkeit,  politische  Ansätze  zu  entwickeln,  die  auf  den  lokalen/regionalen 
Kontext  abgestimmt  sind  und  auf  die  jeweilige  Art  der  nicht  angemeldeten 
Erwerbstätigkeit  eingehen.  Dies  unterstreicht  die  Bedeutung  eines  ganzheitlichen 
Ansatzes zur Bekämpfung der nicht angemeldeten Erwerbstätigkeit. 

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  Optimale  Durchsetzungsmaßnahmen  erfordern  eine  Strategie,  die  andere 
Maßnahmen  miteinander  kombiniert,  wie  z.  B.  eine  stärkere  Sensibilisierung  der 
Öffentlichkeit  für  die  Anforderungen  der  Steuervorschriften,  eine  Kombination  aus 
Prüfungs-  und  Mahnschreiben  an  Selbstanzeiger,  die  Notwendigkeit,  bei  der 
Bewertung  des  Nutzens  einer  Prüfung  die 
indirekten  Einnahmen  zu 
berücksichtigen,  um  die  Kosteneffizienz  zu  gewährleisten,  und  die  Einbeziehung 
sozialer  Normen,  um  an  das  moralische  Verpflichtungsgefühl  des  Einzelnen  zu 
appellieren. 

  Wenn jedoch die  Steuermoral in einer Gesellschaft als niedrig  eingeschätzt wird, 
haben  verstärkte  Durchsetzungsmaßnahmen  nur  eine  geringe  Wirkung. 
Stattdessen  muss  mehr  Gewicht  darauf  gelegt  werden,  die  Ursachen  für  die 
niedrige  Steuermoral  zu  bekämpfen.  Es  gibt  eindeutige  Belege  dafür,  dass  "das 
alleinige  Setzen  auf  Abschreckung  ohne  Berücksichtigung  sozialer  Normen 
wahrscheinlich  eine  unzureichende  Antwort  auf  die  zunehmende  Nichteinhaltung 
von Vorschriften ist".  

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Résumé 

Introduction 

La  Commission  européenne  définit  au  sens  large  le  travail  non  déclaré  comme  "toute 
activité  rémunérée  qui  est  légale  quant  à  sa  nature,  mais  qui  n'est  pas  déclarée  aux 
autorités  publiques".  Le  travail  non  déclaré  a  d'importantes  implications  économiques  et 
sociales,  notamment  la  perte  de  cotisations  de  sécurité  sociale  et  d'impôts,  mais  aussi 
une  incidence  plus  élevée  d'accidents  du  travail,  des  opportunités  de  développement 
professionnel manquées pour les travailleurs, une concurrence déloyale et des distorsions 
du  marché  pour  les  entreprises,  entre  autres.  L'Union  européenne  (UE)  s'est  fixé  pour 
objectif  d'atteindre  un  taux  d'emploi  de  78%  de  la  population  âgée  de  20  à  64  ans  d'ici 
2030  (Pilier  européen  des  droits  sociaux).  La  lutte  contre  le  travail  non  déclaré  peut 
contribuer à cet objectif en créant davantage d'emplois déclarés.  

Dans  ce  contexte,  la  Commission  européenne  a  lancé  cette  étude  afin  de  recueillir  des 
informations plus approfondies et des preuves empiriques sur les politiques et les 
combinaisons de politiques efficaces pour lutter contre le travail non déclaré. Cette 
étude a examiné les preuves empiriques de l'ensemble des mesures politiques directes et 
indirectes,  y  compris  leur  efficacité  potentielle  dans  la  transformation  du  travail  non 
déclaré  en  travail  déclaré.  L'idée  était  d'identifier  les  politiques  les  plus  efficaces  pour 
réduire  le  volume  de  travail  non  déclaré  et  les  dommages  liés  en  fonction  du  type  de 
travail non déclaré, des groupes cibles (moteurs) et/ou des spécificités géographiques.  

Méthodologie 

L'étude a mis en œuvre une méta-évaluation des études sur les types et les moteurs du 
travail  non  déclaré  afin  de  déterminer  leur  impact  sur  les  instruments  politiques  et  sur 
l'ampleur  du  travail  non  déclaré.  L'étude  a  mis  en  œuvre  une  méta-évaluation  des 
recommandations  concernant  l'efficacité  des  politiques  de  lutte  contre  le  travail  non 
déclaré. L'étude a porté sur les 20 dernières années. L'accent a été mis sur les 27 États 
membres de l'UE (UE-27), ainsi que sur les données recueillies dans les pays développés 
ou,  plus  largement,  dans  les  pays  membres  de  l'Organisation  de  coopération  et  de 
développement économiques (OCDE). 

Résultats 

Définitions et types de travail non déclarés 

L'objectif de l'étude était d’examiner les études concernant les définitions, les types et 
les caractéristiques du travail non déclaré et leurs éventuels facteurs : 

  La  littérature  ne  couvre  que  des  types  généraux  de  travail  non  déclaré, 
notamment  l'emploi  non  enregistré,  l'emploi  sous-déclaré  (salaires  enveloppés  et 
autres  formes de dissimulation de  la durée ou de la  rémunération réelle/complète 
de l'emploi), le travail indépendant non enregistré et le faux travail indépendant.  

  L'examen  des  cadres  juridiques  montre  que  ceux-ci  se  concentrent  sur  les 
pénalités  et  les  sanctions  et  se  réfèrent  largement  aux  mêmes  grands  types  de 
travail  non  déclaré.  Il  convient  de  noter  dans  ce  contexte  que  les  sanctions  pour 
travail  non  déclaré  (infractions  au  droit  du  travail,  non-paiement  de  la  sécurité 
sociale)  relèvent  d'un  autre  type  de  législation  que  les  sanctions  pour  non-
paiement  de  l'impôt.  La  complémentarité  ou  la  contradiction  de  ces  cadres 
juridiques n'a pas été démontrée.  

  D'importantes  lacunes  persistent  en  ce  qui  concerne  les  caractéristiques  des 
types de travail non déclaré. Par exemple, les catégories actuelles ne fournissent 

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pas suffisamment d'informations sur la manière dont les formes plus complexes 
de  travail  non  déclaré,  telles  que  les  chaînes  de  sous-traitance  ou  le  travail  sur 
plateforme, peuvent être regroupées dans cette typologie. 

  Une  autre  limite  de  la  typologie  est  que  les  définitions  actuelles  se  concentrent 
principalement  sur  les  motivations  fiscales  ou  financières  qui  poussent  à 
s'engager dans le travail non déclaré (pour échapper aux impôts ou aux paiements 
de sécurité sociale) et moins sur d'autres motivations telles que la participation 
à  la  société  (en  travaillant),  l'absence  de  services  publics  de  qualité  abordables 
(par  exemple,  les  soins  aux  personnes  âgées),  les  pièges  de  l'endettement,  le 
manque  d'opportunités  ou  la  promotion  de  la  solidarité  et  de  l'échange  sociaux. 
Recentrer la typologie sur ces derniers types de motivations permettrait d'axer les 
interventions  politiques  de  manière  plus  complète  sur  les  mesures  susceptibles 
d'améliorer la morale fiscale (qui est un facteur important du travail non déclaré).  

  Les  limites  de  la  typologie  actuelle  du  travail  non  déclaré  pourraient  être 
surmontées si les approches politiques envisageaient une typologie plus locale, en 
regroupant  les  types  de  travail  non  déclaré  et  en  ajoutant  des  facteurs  ou  des 
profils de risque spécifiques au pays ou à la région (par exemple en se concentrant 
sur les formes les plus courantes de travail non déclaré spécifiques à la région, au 
niveau  national  et  sur  leurs  facteurs),  ainsi  que  sur  la  vulnérabilité  (par  exemple 
des  groupes  spécifiques  qui  nécessitent  une  attention  ou  une  protection 
particulière).  Lors  de  l'élaboration  de  mesures  politiques  ciblées,  il  pourrait  être 
utile  de  différencier  les  responsabilités  de  toutes  les  parties  prenantes,  y  compris 
les utilisateurs, les facilitateurs et les annonceurs, ainsi que les facteurs à prendre 
en  compte.  Cela  pourrait  également  donner plus  de visibilité  à  la  combinaison  de 
politiques donnant les meilleurs résultats.  

Moteurs  

L'étude  a  cherché  à  identifier  les  moteurs  et  les  déterminants  qui  conduisent  à  la 
participation au travail non déclaré et à les relier aux types de travail non déclaré identifiés 
afin  de  fournir  une  meilleure  vue  d'ensemble  de  l'éventail  des  politiques  s’adressant  à 
chaque type de travail non déclaré.  

  Aperçu  de  l'impact  des  caractéristiques  socio-économiques  sur  le  travail  non 
déclaré  en  général : l'âge et  le  sexe  sont  en  corrélation  avec  l'occurrence du 
travail  non  déclaré.  En  ce  qui  concerne  l'âge,  les  données  suggèrent  que  plus 
l'individu est âgé, moins il est susceptible de s'engager dans du travail non déclaré. 
Néanmoins,  les  individus  sont  influencés  par  leur  expérience  de  vie  dans  leur 
catégorie d'âge, ce qui signifie que le travail non déclaré est possible à tout âge. Le 
sexe  a  un  effet  direct  et  indirect  sur  le  travail  non  déclaré.  La  probabilité  que  les 
hommes  s'engagent  dans  du  travail  non  déclaré  est  plus  élevée.  En  ce  qui 
concerne  l'éducation,  aucun  lien  général  clair  n'a  été  établi  avec  l'apparition  du 
travail  non  déclaré.  En  ce  qui  concerne  les  facteurs  spécifiques  aux  entreprises, 
les  données  indiquent  que  le  travail  non  déclaré  est  plus  répandu  dans  les 
petites et microentreprises. En termes de secteur, le travail non déclaré est plus 
répandu dans les entreprises opérant dans l'agriculture et la construction.  

  La  littérature  disponible  fournit  peu  d'indications  ou  de  conclusions  solides  sur  la 
manière  dont  les  caractéristiques  sociodémographiques  influencent  les  types 
spécifiques de travail non déclaré. Malgré cela, quelques indications pourraient 
être  intéressantes  pour  l'élaboration  de politiques  efficaces :  le  sexe  n'est  pas  un 
facteur significatif pour l'emploi non déclaré ; et le faux travail indépendant pourrait 
être plus répandu chez les personnes très instruites que chez les personnes non 
qualifiées. Malheureusement, peu d'éléments ont été identifiés en ce qui concerne 
la taille des ménages et la taille de l'établissement (rural/urbain).  

19 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

  En  ce  qui  concerne  les  facteurs  économiques  et  systémiques  plus  larges  du 
travail  non  déclaré,  la  question  de  savoir  si  la  charge  fiscale  a  un  impact  sur 
l'ampleur du travail non déclaré ne peut être démontrée de manière empirique.  

  L'analyse  met  en  évidence  le  caractère  insignifiant  de  la  part  de  la  population 
migrante sur la taille de l'économie non déclarée et indique plutôt que le manque 
de ressources financières en  général est un facteur important  qui encourage 
les  travailleurs  à  s'engager  dans  le  travail  non  déclaré.  Bien  que  certains 
fournisseurs  de  main-d'œuvre  participent  au  travail  non  déclaré  par  nécessité, 
beaucoup le font simplement pour défier les autorités et/ou accroître leur richesse. 
L'insatisfaction à l'égard du travail de l'administration publique, la méfiance à 
l'égard  des  autorités  et  le  faible  moral  des  contribuables  sont  les  principaux 
facteurs de motivation.  

  La 

littérature  est 

lacunaire  en  ce  qui  concerne 

les  autres  facteurs 
systémiques, ce qui empêche de tirer des conclusions sur le rôle de la corruption, 
du  blanchiment  d'argent,  de  la  répression, de  l'État  de  droit,  de  la  facilité  de faire 
des  affaires,  de  la  qualité  de  la  sécurité  sociale,  de  la  viabilité  du  système  de 
retraite  et  d'autres  facteurs  spécifiques  au  pays  en  tant  que  déterminants 
probables du travail non déclaré.  

Échelle / volume 

L'étude  résume  les  recherches  sur  les  estimations  les  plus  récentes  de  l'ampleur  du 
travail non déclaré.  

  Les  données  empiriques  actuelles  sur  l'ampleur  et  la  dynamique  du  travail  non 

déclaré sont difficiles à attribuer à la réussite des politiques.  

  Les  études  utilisent  une  variété  de  méthodes  et  de  calculs  mathématiques  pour 
estimer  le  travail  non  déclaré.  Le  plus  souvent,  la  part  du  travail  non  déclaré  est 
exprimée en pourcentage de la population active, puis en pourcentage du PIB. 
Cependant,  en  raison  de  la  nature  complexe  (cachée)  du  travail  non  déclaré, 
la 
d'autres  études  utilisent  d'autres  méthodes  d'estimation,  ce  qui 
possibilité de comparer les résultats et d'identifier les tendances du travail non 
déclaré dans les États membres de l'UE au fil du temps.  

limite 

  Pour  2017,  une  étude  a  estimé  que  la  taille  moyenne  de  l'économie  souterraine 
dans l'UE-27 était de 16,3% du PIB aux prix du marché (prix courants). Une autre 
étude a estimé qu'en 2019, la part du travail non déclaré représentait en moyenne 
14,8% de la valeur ajoutée brute (VAB) dans l'UE-27. Les estimations suggèrent 
que  l'économie  souterraine  et  la  part  du  travail  non  déclaré  dans  l'UE-27  ont 
diminué au cours de la période 2013-2023.  

  En  ce  qui  concerne  les  types  spécifiques  de  travail  non  déclaré,  il  n'existe 
d'estimations  sur  le  volume  que  pour  le  travail  non  déclaré  ou  les  salaires 
payés de main à la main, ainsi que plus généralement dans les relations d'emploi. 
Les données indiquent que le travail sous-déclaré est la forme la plus répandue de 
travail non déclaré dans l'UE.  

  Une approche convenue pour estimer le travail non déclaré sur une base continue 
serait préférable  au niveau de l'UE  pour continuer à contrôler le volume et fournir 
une base comparative.  

Dommages  

L'étude  présente  des  données  sur  les  dommages  causés  par  le  travail  non  déclaré  afin 
d'identifier  les  politiques  à  privilégier  pour  réduire  les  formes  les  plus  préjudiciables  de 
travail non déclaré.  

20 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

  La recherche existante se concentre sur les dommages économiques causés 
à  la  société  de  manière  plus  générale,  sans  estimer  spécifiquement  ces 
dommages  ni  classer  les  caractéristiques  les  plus  préjudiciables  du  travail  non 
déclaré.  

totales  de  recettes 

  Le  préjudice  causé  par  le  travail  non  déclaré3  est  estimé  à  6,5%  des  dépenses 
publiques totales de l'UE-27 (sur la base des données de 2019). Sur les 6,5 % de 
pertes 
fiscales  (soit  425 279  millions  d'euros),  4,1% 
s’inscrivent  dans  le  cadre  d'une  relation  de  travail,  2,4%  sont  dus  au  travail 
non  déclaré  effectué  par  des  travailleurs  indépendants  et  seulement  0,1%  au 
travail  non  déclaré  des  travailleurs  familiaux  (avec  d'importantes  variations  d'un 
pays à l'autre).  

  Les dommages causés par l'économie souterraine de manière plus générale 
(équivalant à 16,3% du PIB de l'UE-27  en 2017) sur la  base de la perte totale de 
recettes fiscales peuvent être estimés à 13,9% des dépenses publiques totales 
(perte de recettes publiques de 850 427 millions d'euros). 

  L'étude  souligne  que  les  dommages  sociétaux  du  travail  non  déclaré  et  de 
l'économie  souterraine  sont  estimés  significatifs,  même  si  l'on  s'en  tient  aux 
mesures limitées utilisées pour leur estimation.  

  Les  politiques  devraient  se  concentrer  sur  les  formes  de  travail  non  déclaré  les 
plus  préjudiciables  à la société  dans  son  ensemble,  en  protégeant  les personnes 
les  plus  vulnérables  et  en  transformant  leur  situation  de  travail  non  déclaré  ou 
sous-déclaré en une situation déclarée. 

Interventions politiques pour lutter contre le travail non déclaré 

L'étude  identifie  le  type  d'interventions  politiques  les  plus  couramment  recherchées  par 
les  États  membres  de  l'UE  pour  lutter  contre  le  travail  non  déclaré  et  présente  des 
preuves de leur efficacité.  

  L'Europe occidentale et l'Europe centrale et orientale sont les régions de l'UE les 
plus étudiées en ce qui concerne les indicateurs socio-économiques susceptibles 
d'affecter  le  travail  non  déclaré  et  les  politiques  connexes.  En  règle  générale,  les 
considérations  liées  à  la  "conformité  fiscale"  sont  plus  répandues  en  Europe 
occidentale,  tandis  que  les  questions  liées  à  la  "participation  au  travail  non 
déclaré" sont plus importantes en Europe centrale et orientale, ce qui suggère des 
manières différentes de mettre en œuvre les politiques recommandées. 

  Les interventions politiques recommandées ont tendance à être plus générales et 
de  haut  niveau  impliquant  ides  mesures  spécifiques  et  détaillées.  L'information 
est la recommandation la plus fréquente pour lutter contre le travail non déclaré 
dans  les  deux  régions.  L'Europe  occidentale  dispose  d'un  plus  large  éventail  de 
recommandations.  L'Europe  centrale  et  orientale  présente  une  proportion  un 
peu  plus  élevée  de  recommandations  relevant  des  catégories  "moderniser 
les  institutions  formelles"  et  "s'attaquer  aux  déterminants  du  travail  non 
déclaré",  ce  qui  peut  être  lié  à  une  performance  plus  faible  dans  les  indicateurs 
socio-économiques choisis.  

  La  recherche  montre  que  les  interventions  de  mise  en  œuvre  sont  très 
efficaces,  en  particulier  les  audits  et  les  inspections.  Toutefois,  les  interventions 
de  dissuasion  directe  doivent  être  soigneusement  étudiées  afin  de  s'assurer 
qu'elles  sont  utilisées  de  manière  appropriée  et  ciblée.  Une  mauvaise 

3  Sur  la base de la  valeur estimée  du  travail  non  déclaré  (estimée en 2019  à 14,3  %  de  la valeur ajoutée brute), la  perte 
totale  de  recettes  fiscales  a  été  examinée  et  l'impôt  perdu  (c'est-à-dire  l'impôt  sur  le  revenu  et  les  cotisations  sociales 
liées au travail) a ensuite été calculé en pourcentage des dépenses publiques.  

21 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

compréhension  du  contexte  d'une  intervention  pourrait  avoir  pour  conséquence 
involontaire  d'augmenter  le  niveau  de  travail  non  déclaré  ou  de  non-
conformité fiscale, les individus se sentant injustement ciblés et contrôlés.  

  Les mesures indirectes jouent un rôle important dans la lutte contre les éléments 
du  travail  non  déclaré,  en  particulier  ceux  liés  au  non-respect  de  la  législation 
fiscale. La simplification de la communication est un moyen rentable d'accroître 
le  respect  des  règles  et  de  réduire  les  coûts  globaux  de  l'application  de  la 
législation. 

  Les changements législatifs et réglementaires sont importants pour lutter contre 
le  travail  non  déclaré.  Les  options  législatives  doivent  être  soigneusement 
équilibrées  afin  de  garantir  qu'elles  entraînent  des  changements  positifs.  Dans  le 
cas  contraire,  elles  pourraient  créer  des  situations  défavorables  où  les  normes 
sociales et juridiques ne sont pas synchronisées. 

Combinaisons de politiques recommandées pour lutter efficacement contre le 
travail non déclaré, telles qu'identifiées dans la recherche 

En examinant les données empiriques, l'étude identifie les combinaisons de politiques qui 
pourraient  contribuer  à  un  cadre  holistique  de  lutte  contre  chaque  type  de  travail  non 
déclaré.  Ces  données  peuvent  être  utilisées  au  niveau  des  États  membres  pour 
l'élaboration des politiques. 

  Les données suggèrent de ne pas s'appuyer uniquement sur la répression, les 
incitations  ou  les  interventions  indirectes  pour  lutter  contre  le  travail  non 
déclaré. Les données confirment la nécessité d'élaborer des approches politiques 
adaptées  au  contexte  local/régional  et  au  type  de  travail  non  déclaré  ciblé.  Cela 
confirme  l'idée  qu'il  est  important  d'adopter  une  approche  holistique  pour  lutter 
contre le travail non déclaré. 

les 

  Pour  être  considérées  comme  optimales, 

interventions  en  matière 
d'application  de  la  loi  doivent  s'appuyer  sur  une  stratégie  combinant  d'autres 
interventions,  telles  qu'une  sensibilisation  accrue  du  public  aux  exigences  de 
conformité  fiscale,  une  combinaison  de  lettres  de  rappel  d'audit  et  de  pénalités 
envoyées aux personnes qui se déclarent, la nécessité de prendre en compte les 
recettes  indirectes  lors  de  l'évaluation  de  l'utilité  d'un  audit  pour  garantir  un  bon 
rapport  coût-efficacité,  et  l'inclusion  d'un  message  sur  les  normes  sociales  pour 
faire appel au sens de l'obligation morale des individus.  

  Toutefois,  lorsque  la  morale  fiscale  sous-jacent  d'une  société  est  jugé  faible, 
l'augmentation  des  efforts  de  mise  en  œuvre  n'aura  qu'un  effet  marginal.  Il  faut 
plutôt s'attacher à répondre aux problèmes sous-jacents qui sont à l'origine de ce 
faible  morale  fiscale.  Il  est  clair  que  "le  fait  de  s'appuyer  uniquement  sur  la 
dissuasion  sans  tenir  compte  des  normes  sociales  est  probablement  une 
réponse insuffisante à l'augmentation des niveaux de non-conformité".  

22 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

1 

Introduction  

The  current  report  was  commissioned  by  the  European  Commission  to  review  available 
evidence  on  the  effectiveness  of  policies 
tackling  undeclared  work.  The  report 
summarises the findings from a systematic and in-depth review of empirical evidence.  

1.1 

Study objective and design 

This section provides an overview of the study’s objective and research design. It outlines 
how  this  research  fits  into  the  broader  policy  intervention  logic  of  tackling  undeclared 
work.  Some  general  limitations  of  the  research  approach  are  discussed,  including  those 
concerning  definitions  of  undeclared  work  and  the  shadow  economy,  as  well  as  the 
limitations inherent in research related to undeclared work.  

1.1.1 Study objective 

Despite  Member  States  having  deterrence  and  preventive  policy  measures  in  place  to 
tackle  undeclared  work,  little  is  known  about  the  long-term  effectiveness  of  these 
measures on the extent of undeclared work in the economy. There is some evidence that 
a  holistic  policy  approach  could  achieve  better  results  than  single  policy  measures  or 
actions.4  

The differences in the productive structure, the institutional strength of public bodies and 
regulatory systems, and the scope of welfare state systems all need  to be considered to 
inform effective national policy approaches to tackle undeclared work. In addition to these 
national features, individual determinants were also understood to play a role in identifying 
the most suitable combination of policies to tackle different types of undeclared work.  

This study reviewed empirical evidence and knowledge across the full range of direct and 
indirect policy measures, including their potential effectiveness in transforming undeclared 
work  into  declared  work.  A  meta-analysis5  of  studies  on  the  types  and  drivers  of 
undeclared  work was  conducted to determine  their  impact  on related  policy  instruments. 
The  results  were  intended  to  inform  a  multidimensional  model  that  estimates  the 
impact/interrelation of different factors (e.g., incentives, sanctions, and context - described 
by predefined variables) on the volume of undeclared work. The study seeks to provide a 
consolidated  evidence  base  on  the  effectiveness  of  tools  in  the  fight  to  transform 
undeclared work into declared work and, importantly, on the comparative effectiveness of 
policies. Ideally, the study results would identify the key tools to develop in the short term.   

The  scope  of the  study  is  limited  to the  past  20 years.  It focuses  on  the 27  EU Member 
States  (EU-27)  and  on  evidence  gathered  from  developed  countries  more  broadly  (i.e., 
Organisation of Economic Co-operation and Development (OECD) countries). 

The study team undertook two main tasks: 

-  Task  1  was  primarily  dedicated  to  a  meta-analysis  (meta-regression)  of  the 
determinants  of  undeclared  work.  It  aimed  to  shed  light  on  the  individual  and 
systemic drivers that lead to undeclared work. The analysis here illustrates the 
circumstances  in  which  direct  policy  measures  (identified  under  Task  2)  are 
(in)effective.  

Additional qualitative research was undertaken in order to better understand the 
definitions of undeclared work and types of undeclared work (see Section 2.1). 

4  Williams,  C.C.  and  Horodnic,  I.,  Trends  in  the  undeclared  economy  and  policy  approaches,  European  Commission, 

Brussels, 2021. 

5 Meta-analysis is a statistical technique for combining data from multiple studies on a particular topic. 

23 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Task  1  also  seeks  to  identify  possible  directions  for  narrowing  the  scope  of 
interventions  by  understanding  better  how  types  of  undeclared  work  are 
characterised  (see  Section  2.2).  Finally,  an  overview  is  provided  of  data 
concerning the volume of undeclared work across the EU and, on that basis, to 
estimate  the  government  loss  in  the  state  budget  revenues  in  the  EU-27 
(Chapter 3).  

-  Task  2  was  a  meta-evaluation6  of  information  on  the  effectiveness  of  policies 
including 

and  measures 
tackle  various 
researching promising policy combinations (see Chapter 4).  

forms  of  undeclared  work, 

to 

Before  presenting  the  results,  it  is  useful  to  present  the  starting  point  and  assumptions 
that guided the study design. 

1.1.2  Policy intervention logic and study design 

The policy intervention logic (see Figure 1 below) served as a logical framework through 
which  the  broader  context  and  expected  outcomes  of  undeclared  work  policies  can  be 
understood. It has several interrelated parts:  

  Needs and drivers addressed by the policies;  

  Objectives put in place by the legislation to address those needs;  

  Actions undertaken to meet the needs;  

  Expected short-term results of those actions;  

  Expected long-term impacts that resolve the needs;  

  External  influencers,  i.e.,  other  factors  that  influence  the  consequences  but  are 

external to the scope of the legislation.   

The ‘needs’ describe problems linked to undeclared work in the EU-27, while the ‘drivers’ 
describe factors known or theorised to contribute to work not being declared.7 Needs were 
not  part  of  the  focus  of  this  research,  which  instead  focuses  on  the  drivers  found  in 
empirical research. Yet, policy makers start with the identification and definition of needs 
in order to determine the ‘overall objective’ of any intervention or policy measure.  

The study assumes that the overall objective is to reduce the likelihood undeclared work 
or  transform  it  into  declared  work.  This  overall  objective  can  be  reached  by  the 
achievement  of  ‘specific  objectives’,  such  as  an  increase  in  regular  employment,  a 
decrease  of  the  likelihood  in  undeclared  work,  or  an  increased  awareness  of  issues 
related  to  undeclared  work.  This  study  considers  all  policies  contributing  to  the 
achievement of one or more of the specific objectives (directly or indirectly) to be policies 
tackling undeclared work (although not all such policies are within the scope of this study). 
Figure  1  does  not  provide  an  exhaustive  list  of  drivers,  needs,  or  specific  objectives  but 
rather can be seen as examples (taken from the list of those found in the literature). The 
policy intervention logic uses the EU definition of undeclared work8 but does not develop 
the  underpinning  conceptual  links  between  drivers  and  interventions.  Nor  does  it  tackle 
the wider shadow economy (see Section 2.1). 

The  sequence  ‘Inputs’,  ‘Outputs’,  ‘Results’,  and  ‘Impacts’  describes  how  public  policies 
tackling  undeclared work  are  expected to  work.  Inputs  are  the  efforts  by  public  actors  to 

6 A meta-evaluation is an instrument used to aggregate findings from a series of evaluations 
7 Section 2.2 describes the results of the research into the drivers and needs produced by undeclared work and explores the 

typology of undeclared work, its volume, and scale across the EU. 

8 At EU level, undeclared work is defined as ‘any paid activities that are lawful as regards their nature, but not declared to 
the  Member  States’ 

into  account  differences 

regulatory  systems  of 

the 

in 

public  authorities, 
taking 
(https://www.ela.europa.eu/en/undeclared-work). 

24 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

develop  and  implement  a  policy.  Outputs  are  the  actions  taken  pursuant  to  that  policy 
(quantifiable as applied). Results describe the direct, short-term achievement of the policy, 
while  impact  encapsulates  the  longer-term  effects  of  those  results.  The  aim  of  Task  2, 
looked  at  in  Chapter  4,  is  to  provide  more  information  about  the  results  and  impacts  in 
relation to the overall objective of reducing the likelihood of undeclared work.   

25 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Figure 1.  Policy intervention logic as underlying model for research 

26 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

There are some limitations to the definition of undeclared work. The definition adopted by 
the  European  Commission  in  2007  and  used  as  the  reference  point  for  this  literature 
search  refers  to  any  paid  activities  that  are  ‘lawful  as  regards  their  nature,  but  not 
declared to public authorities, taking into account differences in the regulatory systems 
of the Member States.’9  

The  definition  of  undeclared  work  remains  broad,  as  Member  States  have  different 
regulatory systems, each setting out different limitations on what can be considered lawful 
or unlawful. In addition, the definition does not specifically refer to the unpaid sphere, or to 
‘favours’  between  neighbours  and  friends  (e.g.,  home  services)  or  hobbies  (e.g.,  art, 
music,  amateur  sports,  interior design or  jewellery for  which small  amounts are received 
regularly via online platforms) as well as new activities (e.g., social media, podcasting or 
internet activities financed via advertisements, or entertainment TV where participants can 
be  qualified  as  employees10)  that  turn  into  declared  work.  The  threshold  may  differ 
significantly  among  the  Member  States.  The  term  ‘informal  economy’  aims  to  take  into 
account activities that may not be regulated by the state as activity or work that is carried 
out without a proper licence (e.g., selling goods at local markets, hairdressers without the 
actual  licence).  On  the  other  hand,  the  term  ‘shadow  economy’  also  includes  criminal 
types of activities (selling illegal goods, misuse of public goods). In some cases, there is a 
fine  line  between  what  is  categorised  under  national  legal  rules  as  ‘criminal’  or 
‘undeclared’.  Some  forms  of  ‘undeclared  work’  may  also  be  criminalised  under  national 
law such as employing undeclared workers in dangerous professions (due to high health 
and safety risks).  

Accordingly, definitions describing undeclared work in the literature refer to one or more of 
the following three key motivations:   

-  To evade payment of income, VAT or other taxes;  

-  To evade payment of social security contributions;   

-  To  evade  certain  legal  labour  standards,  such  as  minimum  wages,  maximum 

hours, health and safety standards, etc. 

Next to the issues around the definition, any research into undeclared work faces multiple 
challenges and the study sought to mitigate these where possible:11  

 

Identify an approach to deal with definition and scope issues; 

  Violation of laws (taxation, labour regulations, social security provision) are defined 
at  national  level  and  as  such  require  multiple  comparative  studies  to  understand 
the relative effectiveness of policies;  

  Understanding how drivers or policies may have impacted the scale and volume of 
undeclared work and specific types of undeclared work requires regular production 
of cross-country estimates to compare changes over time;  

  While policy makers in the EU are conscious of the problems related to undeclared 
work  and  the  European  Labour  Authority  (ELA)  has  a  mandate  to  tackle 
undeclared  work  and  contribute  to  the  transition  into  declared  employment,  the 

9  European  Commission,  Communication  from  the  Commission  to  the  Council,  the  European  Parliament,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  -  Stepping  up  the  fight  against  undeclared  work, 
COM(2007) 628 final, 2007. 

in 

10  According  to  Glance  (Mediametrie),  collecting  data  on  TV  formats  and  audiences  both  in  Europe  and  outside  Europe 
highlights that TV formats of an entertainment kind (with non-actor participants) represent about one third of primetime TV 
activities 
report,  accessed  at:  https://www.glance-
(2019),  Entertainment 
mediametrie.com/en/entertainment-tv-report-2019 .  
A  well-known  case  in  France  from  2009  of  the  Social  Chamber  of  the  High  Court  (Cours  de  Cassation)  re-qualified  a 
participant contract for an entertainment TV format (Temptation Island) as a labour contract – reference accessed here: 
https://www.doctrine.fr/d/CASS/2009/JURITEXT000020708141  

the  EU.Glance-Mediametrie 

11  Chapter  5  of  the  OCED  Employment  Outlook  (2004)  contains  a  useful  overview  of  challenges.  Available  at: 

https://www.oecd.org/employment/emp/34846912.pdf. 

27 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

success  of  policies  depends  also  on  a  broader  social  consensus  on  tackling 
undeclared  work.  The latter  depends  on  several factors;  for  example,  perceptions 
of fairness play an important role, such as how to tax labour. An example here  is 
the  on-going review of the classification of online platforms, namely distinguishing 
those  that  essentially  aim  to  connect  ‘friends’  to  provide  small  amounts  of 
help/work (gardening, repair works, etc. – platforms that are genuinely cooperative) 
from  those  that  aim  to  link  consumers  to  professionals  (commercial  platforms). 
Perceptions  of  a  fair  amount  of  additional  secondary  income  are  also  of 
importance.  This  requires  regulatory  differentiation  for  example,  again  referring  to 
the regulation of the use of online platforms (e.g. the need to tax differently those 
operations  that  are  genuinely  cooperative  and  those  that  are  purely  commercial). 
This  requires  a  common  understanding  of  how  to  tax  secondary  income.12 
Understanding the drivers and specific types of undeclared work requires national 
studies that combine an understanding of legal definitions, taxation, and drivers of 
using specific forms of undeclared work;  

  Cultural  and  country  specific  factors  continue  to  play  a  role  in  successful  policy 
intervention  to  tackle  undeclared  work.  In  some  areas,  policies  may  pursue 
contradictory  objectives.  For  example,  the  bureaucracy  often  associated  with 
securing rights (social protection) and protection of property may be perceived as a 
reason  to  circumvent  their  application.  Yet,  the  simplification  of  laws  (labour  law, 
administration of taxes or enterprises) can also have adverse effects, for example, 
facilitating  corruption  or  the  malfunctioning  of  institutions  and  legal  frameworks, 
weakening property rights, and increasing the likelihood of undeclared work.  

  Any  conclusions  on  the  effectiveness  of  a  policy  mix  in  tackling  undeclared  work 
requires  sufficient  empirical  depth.  A  multivariate  analysis  that  controls  for  the 
range of factors involved can also be used to help understand policy effectiveness. 

1.2 

Structure of the report 

The report is structured following the logic of the tasks and the policy intervention logic 
(Figure 1 above): 

  Chapter 2 presents the results of the research on definitions and characteristics of 
undeclared  work  as  well  as  the  research  examining  the  determinants  of  various 
forms  of  undeclared  work. This  is  linked to  Task  1  and contributed to refining the 
scope of the policies that contribute to tackle undeclared work; 

  Chapter  3  provides  an  overview  of  the  volume  and  scale  of  undeclared  work 
across  the  EU-27  and  the  associated (estimated)  social  damage.  This analysis  is 
part  of  Task  1  and  contributed  to  understanding  the  needs  and  problem  of 
undeclared work; 

  Chapter 4 presents the results of the research on policies tackling undeclared work 
(Task 2). The aim was to summarise Member States' policies to tackle undeclared 
work and the effectiveness of those policies; 

  Chapter 5 recaps on the literature review to identify areas for future research; 

  Chapter 6 summarises the study and offers conclusions. 

12 Differences in social norms play an important role. Local communities have a varying understanding of what is considered 
to be undeclared work. See for ex. Arendt, L., Grabowski,  W.W., & Kukulak-Dolata, I.  (2020), County-Level Patterns  of 
Undeclared  Work:  An  Empirical  Analysis  of  a  Highly  Diversified  Region  in  the  European  Union, Social  Indicators 
Research, 149, 271-295; or Ianole-Călin, R., Horodnic, I.A., & Plopeanu, A. (2022), Intrinsic versus Extrinsic Drivers: An 
Investigation  into  Young  People’s  Motives  to  Engage  in  Under-Declared  Employment  and  Undeclared  Work,  Eastern 
European Economics, 60, 559 - 577. 

28 

 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

2  Understanding the characteristics of types of 
undeclared work and their possible drivers 

This section provides an overview of the types of undeclared work and their drivers.  

2.1 

Types of undeclared work and policy implications 

This  research  took  as  its  point  of  departure  the  hypothesis  that  different  types  of 
undeclared  work  might  require  different  policy  solutions.  The  aim  of  this  research  is  to 
provide a multi-dimensional overview of three broad types of undeclared work that serve 
as its starting point. These three forms are as follows:  

  Unregistered employment;13  
  Under-declared employment,14 including envelope wages;15 
  Undeclared self-employment;16 

As  a  first  step,  information  collected  by  the  European  Platform tackling  undeclared  work 
was reviewed for this study with the aim of analysing the existing information about legal 
definitions  of  undeclared  work  among  EU  countries.  The  reason  for  this  step  was  to 
understand  the  extent  to  which  various  legal  definitions  in  Member  States  were  aligned 
with  the  EU‘s  definition  and  referred  to  above  types  of  undeclared  work.  Additionally, 
another  aim  of  the  analysis  was  to  understand  how  the  definitions  on  undeclared  work 
links to the different types of legal areas (taxation law, labour law, social security law, any 
other  laws)  and  whether  additional  sub-types  of  undeclared  work  have  been  defined  in 
national laws of the Member States. Next, the research also looks at the extent to which 
legal definitions and legal concepts use a holistic approach (specifying undeclared work in 
various  types  of  law  –  criminal,  civil,  labour,  and  tax  law).  The  second  step  involved  a 
review of the literature to identify categories and sub-types of undeclared work.  

2.1.1 Review of legal definitions and types of undeclared work 

From the information available (dated 2017) only 11 Member States have legal definitions 
of  undeclared  work.  Of  these,  two  Member  States  (BE,  AT)  have  a  legal  definition  of 
undeclared  work  in  their  criminal  code  (see  Table  1  below)  and  two  (DE,  SI)  have  a 
specific  Act  on  undeclared  work.  For  another  three  Member  States  a  legal  definition  is 
contained in the employment code (FR, LT, LU), and again for a further three States in the 
tax code (DK, NL, FI). One  Member State (SE) has a national legal definition that aligns 
with the EU definition of undeclared work (see Table 1).  

13  An  employment  relationship  which  is  not  registered  with  the  authorities  when  it  should  be  registered.  Such  employees 
often do not have written contracts or terms of employment and their remuneration is most probably undeclared in nature. 
14 When formal employers pursue the illegal practice of reducing their tax and social security payments, and therefore labour 
costs, by  under-declaring the remuneration of  employees.  This  occurs when employers pay  their formal  employees  two 
salaries:  an  official  declared  salary  and  an  additional  undeclared  (‘envelope’)  wage  which  is hidden  from  the 
authorities for  tax  and  social  security  purposes.  Alternatively,  an  employer  can  under-declare  the  number  of  hours  an 
employee  works  to  evade  paying  the  minimum wage  (see  also  Williams,  C.C.  and  Horodnic, I.A.  (2017)  Evaluating the 
illegal employer practice of under-reporting employees’ salaries”, British Journal of Industrial Relations, Vol. 55, No. 1, pp. 
83-111 

15  Often  used  in  the  context  of  under-declared  employment,  an  envelope  wage  is a  cash-in-hand  wage  paid  by  a  formal 
employer to a formal employee in addition to their official declared salary, to reduce their tax and social security payments 
and therefore labour costs. It arises from an agreement between the employer and employee, and additional conditions 
may be attached to its payment, which are not in the formal written contract or terms of employment – see also Williams, 
C.C.  and  Horodnic,  I.A.  (2017),  Evaluating  the  illegal  employer  practice  of  under-reporting  employees’  salaries”,  British 
Journal of Industrial Relations, Vol. 55, No. 1, pp. 83-111 

16 paid activity conducted  by  the  self-employed  where income  is not declared  for the purpose  of  evading either tax  and/or 

social insurance contributions owed. The self-employed might not declare either some or all their income. 

29 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

The  remaining  16  Member  States  have  no  legal  definition  in  codified  law  but  use  a 
working  definition.    This  demonstrates  that many  Member  States  tend  to  operate  on  the 
basis  of  a  common  understanding  concerning the  broader definition  of  undeclared  work, 
aligning  with  the  definition  used  by  the  EU  Platform  tackling  undeclared  work.  Yet,  the 
legal  approach  (using  a  legal  definition  for  undeclared  work,  legal  area  (tax,  labour  or 
criminal  law)  to  tackling  undeclared  work  is  not  the  same.  In  addition,  as  already 
mentioned the EU’s definition sets out a concept but does not provide specific categories 
or types of undeclared work. 

Table 1.  Member States’ definitions of undeclared work 

Type of undeclared work covered by Member State laws  

Member States  

Legal definition according to EU definition 

Legal definition found in Criminal Code  

Legal definition found in Tax Code  

Legal definition found in Employment Code 

Legal definition found in Act on Undeclared Work 

No legal definition – most relevant related to definition of illegal 
work 

SE 

BE, AT  

DK, NL, FI  

FR, LT, LU 

DE, SI 

CZ, PL 

No legal definition – most relevant related to definition of 
shadow/hidden/grey/underground/black/non-observed economy 

BG, IE, EL, MT, 
RO  

No legal definition – most relevant legal reference is provided by 
the Act on Illicit Work/Employment 

SK 

No legal definition – undeclared work considered to cover 
activities that are not declared to the relevant authorities 

ES, IT, PT 

No legal definition – national institutions use different definitions  EE, CY, LV, HU 

No legal definition – national definition aligns with EU definition of 
undeclared work 

HR 

Source: ICF, based on European Platform tackling undeclared work, Member State Factsheet and Synthesis 
Report,  Brussels:  European  Commission,  2017;  Ministry  of  Social  Security  and  Labour  of  the  Republic  of 
Lithuania,  Illegal  work,  2020.  Available  at:  https://socmin.lrv.lt/en/activities/labour-and-employment/labour-
law/illegal-work 

Definitions  of  undeclared  work  can  indicate  whether  a  Member  State  follows  a  partial 
approach  to  tackling  undeclared  work,  e.g.,  the  main  focus  might  be  on  fighting  fraud 
(non-declaration  of  social  security  payments,  non-declaration  of  wage  payments).  If 
specified in employment rules, for example, sanctions might focus on the regularisation of 
workers by requesting employers to declare the worker to social security bodies or ending 
the  employment  relationship  (though  making  back  payments  for  months  employed),  to 
end the non-compliance with employment rules.  

But  undeclared  work  also  means that  taxes  or social  security  contributions are  not  paid, 
yet  taxation  law  or  social  security  law  may  not  necessarily  attach  similar  consequences 
and  focus  instead  on  the  repayment  of  lost  contributions  and  sanctions.  This  latter 
approach,  however,  could  contribute  to  bankruptcy  for  a  company  or  result  in  non-
payment  due  to  lack  of  funds.  These  types  of  rules  would  not  necessarily  contribute  to 
transforming undeclared work into declared work. The sanctions can also be contradictory 
– by setting different incentives (not following tax law is maybe more problematic than not 

30 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

following employment law). Sanctions classify the severity of undeclared work e.g. worse 
to  operate  an  undeclared  business  with  undeclared  workers  than  operating  a  declared 
business  with  partially  declared  employees.  Therefore,  sanctions  which  set  different 
incentives and consequences in different areas of focus can be at cross purposes and fail 
to  achieve  desired  objectives  in relation to  reducing  undeclared  work.  It also  seems that 
sanctions  to  do  not  consider  missed  opportunities  for  businesses  such  as  other 
businesses operating with declared workers may have missed out business opportunities 
such  as  winning  service  contracts,  or  workers  that  could  not  build  a  career  or  receive 
further training are not considered as part of the sanctions. The latter may increase the tax 
morale for example and reduce incentives for undeclared work. 

A  definition  of  undeclared  work  in  criminal  law  ensures  that  some  forms  of  undeclared 
work that are considered to be more serious receive more severe punishment (employing 
personnel  in  sectors  considered  as  high  risk  for  health  and  safety  e.g.  construction  or 
transport).    This  is  interesting  as  it  requires  defining  more  precisely  types  of  undeclared 
work and their severity (or ranking them according to severity). In Austria, for example, the 
criminal  act  focusses  on  ‘organised  undeclared  work’  as  a  form  of  organised  crime 
suggesting that several cases of undeclared work linked to  one  organisation/employer is 
considered to be more severe than an employer with fewer cases of undeclared work. In 
contrast, in Belgium, the Social Criminal Code provides a definition that includes all types 
of  undeclared  work  (mostly  linked  to  the  three  types  above  in  Section  2.1.).  The  most 
severely  punished  forms  are  those  where  an  employer  omits  to  declare  a  worker  in 
specific sectors (e.g., construction, HORECA, agriculture)17 in compliance with the law. In 
these sectors the immediate declaration of a worker upon hiring is required compared to 
under- or late declaring in other sectors.  

The  German  approach  of  having  a  specific  law  on  undeclared  work  –  Act  of  tackling 
undeclared  work18 - is interesting in so far as it combines non-compliance in tax, labour, 
and  social  security  law. The  forms  characterised  as  undeclared  work  in  the  German  Act 
are  undeclared  employees  (partial  or  fully)  and  bogus  self-employment,  operating  an 
enterprise that does not have a licence to operate, not registered businesses, as well as 
under-declared employment. The German Act also defines what cannot be considered as 
undeclared work – namely, paid favours, activities that are provided without any intention 
to  make  profit  (linked  to  helping  neighbours  or  family).  It  punishes  most  severely 
‘organised undeclared work’ or ‘undeclared work provided to achieve important economic 
advantages’ (Section 8 ScharzArbG). The latter considers the form of undeclared work of 
business that provide work on an undeclared basis to workers in order to operate at lower 
costs  compared  to  its  competitors.  On  other  hand,  it  does  not  address  prevention  or 
turning  undeclared  work  into  declared  work.  The  provisions  in  Slovenia  (Prevention  of 
Undeclared Work and Employment Act (ZPDZC-1)) on the other hand are also of interest, 
as under the national law it is illicit to advertise or facilitate undeclared work. This brings 
an additional category of actors into focus that seems to be largely ignored so far by the 
literature.  

In  general, the  legal frameworks  that  define types of  undeclared  work focus  primarily  on 
recovering  lost  payments  of  taxes,  social  security  contributions,  and  wages.  In  some 
Member  States  (with  criminal  law  definitions)  actors  involved  in  undeclared  work  are 
punished more severely at a personal level.  National legal definitions of undeclared work 
closely linked to the types of undeclared work that were identified at the start of this study, 
are  essentially  linked  to  non-compliance  with  labour  and  social  security  rules  (non-
declaration  and  under-declaration  of  employment).  The  research  uncovered  as  a  severe 
form  of  undeclared  work  ‘organised  undeclared  work’,  which  refers  to  an  employer 

17 Social Criminal Law Book, Art. 181, accessed at: 

https://www.ejustice.just.fgov.be/cgi_loi/change_lg.pl?language=fr&la=F&cn=2010060607&table_name=loi 

18 Schwarzarbeitsbekämpfungsgesetz SchwarzArbG – accessed at: https://www.gesetze-im-

internet.de/schwarzarbg_2004/BJNR184210004.html  

31 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

operating  formally  (declared  enterprise)  but  with  several  un-  or  under-declared  workers, 
as  well  as  operating  informally  (without  a  business  registration,  without  the  required 
licences).  The  focus  of  law  on  non-declaration  in  the  regulatory  frameworks  seems  ill-
adapted for  more  complex  and  sophisticated  cases  of  undeclared  work  –  such  as  those 
related to temporary work agencies.  

The specific case of undeclared work in the context of temporary work agencies 

Unregistered  employment  and  under-declared  employment  involving  temporary  work 
agencies  can  take  various  forms.  In  cases  of  unregistered  employment,  workers  can 
have  a  full-time  or  part-time,  temporary  or  permanent  job.  Specific  sub-types  occur 
when  more  stakeholders  are  involved.  For  example,  a recent  study  on  the  connection 
between  temporary  agency  work  and  undeclared  work  reveals  multiple  forms  of  both 
unregistered and under-reported employment (Pavlovaite et al., 2021). Under-declared 
employment  can  occur  where  all  three  parties  (worker,  temporary  agency  work,  and 
user company) are registered. Under-declared work can take place between:  

The  worker  and  the  temporary  work  agency  –  when  the  agency  under-reports  the 
employment to save tax and social security costs and the user company is unaware; 

The worker and the user company – when the user company under-reports the working 
time to the agency to save on fees;  

The  user  company  and  the  temporary  work  agency  –  where  there  is  an  agreement 
between the two parties and the agency covers up undeclared work by the employer by 
falsifying data or by retroactive agreements. 

Where  one  or  more  stakeholders  are  not  registered  or  licensed,  various  forms  of 
unregistered employment occur:  

Unregistered worker, licensed temporary work agency, and formal employer – where a 
licensed agency makes a worker available to a user company and does not register the 
worker in order to evade tax and social contributions; 

Unregistered worker, unlicensed temporary work agency, and formal employer – where 
an  unlicensed  agency  (e.g.,  unlicensed  agricultural  gangmaster  agency)  makes 
available  an  unregistered  worker  to  a  formal  employer  in  exchange  for  a  fee  and  the 
worker is paid ‘cash-in-hand’; 

Unregistered  worker,  licensed  temporary  work  agency,  and  unregistered  company  – 
where, for a fee, a licensed agency makes available an unregistered worker to work on 
an undeclared basis for an unregistered company; 

Unregistered worker, unlicensed temporary work agency, and unregistered company – 
where  an  unlicensed  agency  makes  available  an  unregistered  worker 
to  an 
unregistered company for an undeclared fee, i.e., where none of the three stakeholders 
declares the transaction (Pavlovaite et al., 2021). 

The  example  of  temporary  agency  work  demonstrates  that  complex  contractual 
situations  involving  multiple  parties  may  result  in  a  higher  risk  of  undeclared  work 
occurring.  There  is  currently  no  clear  evidence  from  the  literature  that  flexible 
employment  contracts  (in  their  legal  setting)  can  be  seen  as  a  sub-form  of  under-
declared work. Casual work or other forms of flexible employment that offers, relatively 
speaking,  only  a  small  number  of  hours  of  work,  provides  low  wages,  and  poorer 
working conditions may be a higher risk for under-declared work.19  

19  Research  on  this  has  been  undertaken  by  Eurofound  of  which  a  summary  can  be  found  via  this  link: 

https://www.eurofound.europa.eu/topic/undeclared-work   

32 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

The  literature  reviewed  tends  to  focus  more  on  the  specific  definitions  for  undeclared 
work,  sanctions,  and  penalties.  However,  it  is  rarer to  find  evidence  that  looks  also  at  a 
combination  of  more  general  employment  laws  combined  with  fiscal  regime  of  specific 
activities (taxation), as well as type of employment contract (preferably sector specific for 
those  that  are  more  prone  to  undeclared  work).20  Such  evidence  could  contribute  to 
identify legal gaps and drivers that perhaps facilitate or discriminate against some actors 
accessing  markets  equally,  for  example,  in  construction  –  lack  of  SMEs  to  respond  to 
public procurement, access to markets (who can get a licence to sell on a local market), 
price of licences  etc). This suggests that further analysis might offer a solution to identify 
potential  contradictions  and  gaps  to  ensure  a  holistic  approach  is  taken  in  legal 
frameworks and policy frameworks tackling  undeclared work.  To date, no such analysis 
has been identified either by a Member State or within academia.21 

Key takeaways  

Legal  frameworks  focus  on  penalties  and  sanctions  referring  largely  back  to  the  main 
types  of  undeclared  work  outlined  –  undeclared  employment  and  self-employment  (or 
undeclared  companies)  and  under-declared  business  operations  and  employment.  In 
addition, legal definitions recognise ‘organised undeclared work’ as a more serious form 
of  undeclared  work  (when  several  employees  are  involved  to  the  benefit  of  another 
person,  employer  or  others).  In  addition,  those  that  ‘facilitate’  undeclared  work  or 
‘advertise’ undeclared work can be considered equally serious.  

2.1.2 Review of definitions and types of undeclared work in the 

literature 

The  literature  typically  focuses  on  the  ‘shadow  economy’,  ‘informal  economy’  or 
‘informal  employment’,  as  well  as  undeclared  work  generally,  rather  than  focusing  on 
specific types of undeclared work.  

Using  a  ‘degree  of  formalisation’  approach,  combining  the  knowledge  of  literature 
reviewed,  Figure  2  presents  a  useful  understanding  of  the  various  forms  of  undeclared 
work  by  showing  employment  relationships  on  a  continuum  from  formal  to  informal 
relationships.  

Figure 2.  A typology of informal employment relationships  

More Formal 

Formal 
employment

Bogus self-
employment

Under-
declared 
employment

Unregistered 
employment

Informal 
self-
employment

Paid favours

Source: adapted from Williams (forthcoming, 2023). 

More Informal

21 Not in English at least – which was the language used for research.  

33 

 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

The  literature  reviewed  for  this  study  confirms  the  existence  of  these  broad  forms  of 
undeclared  work.  Bogus  self-employment  has  also  been  identified  as  a  form  of 
undeclared  work  with  specific  dynamics.22  For  example,  according  to  a  German  study 
specifically  young  professionals  and 
low  professional  educational 
achievements seemed to be at relatively high risk of bogus self-employment. On the other 
hand,  highly  professionally  educated  bogus  self-employed  are  rarely  uncovered  as  such 
because  their  contractual  conditions  are  better  negotiated/formulated.23  This  means  that 
those with higher wages and good working conditions are rarely subject to a legal dispute 
and are unlikely to be identified as bogus self-employed (due to the contracts negotiated 
and limited possible legal re-qualification under the criteria available in labour law).  

those  with 

Understanding  remains  patchy  of  the  specific  characteristics  of  the  broad  types  of 
undeclared  work.  For  example,  while  under-declared  self-employment  could  be 
considered as a form of tax-evasion, it has received least mention in the literature. 

Types of under-declared employment 

Other  types  of  under-reported  employment  relate  to  the  value  and  frequency  of  the 
unreported wage. Recent studies (Williams and Horodnic,  2017, Horodnic and Horodnic, 
2022)  revealed  four  main  types  of  under-reported  employment  (envelope  wages  – 
identified for Romania, Bulgaria, Croatia, and FYR Macedonia):  

  A monthly fixed cash supplement to the fixed official declared wage;  
  A varying cash supplement to the fixed official declared wage in line with 

professional achievements (i.e., linked to speed/quality of work);  

  A varying cash supplement to the fixed official declared wage, based on hours 

worked;  

  An occasional undeclared cash payment, such as a holiday allowance, 13th month 

wage, or bonus;  

  Unfortunately, the literature so far does not reveal more of under-reported practices 
in countries from Northern or Western European countries as supplements may 
also be cashless transfers (e.g., goods or other services). 

Overall,  the  literature  focuses  less  on  understanding  the  practices  to  conceal  activities 
from  public  authorities  (and  reasons  for  a  chosen  method  of  concealment)  and  more  on 
the factors driving the engagement in undeclared work activities in general. This helps to 
determine  the  size  and  scale  of  the  undeclared  economy,  as  well  as  defining  fields  of 
action  for  policies  to  tackle  undeclared  work.  To  date,  the  ‘type’  of  undeclared  work  has 
played  a  less  formal  role  in  research.  For  example,  when  examining  determinants  of 
undeclared  work,  a  number  of  papers  (principally  based  on  Eurobarometer  survey  data) 
found that precarious work contracts (or no written contracts), variable salaries, or work by 
objective  were  characteristics  of  undeclared  work  (e.g.,  Popescu,  et  al  2016).24  This 
suggests  that  precarious  work  and  the  fragmentation  of  labour  relations  (multiple 
employment contracts) play an important role in explaining variations of undeclared work 
across  countries  (e.g.,  Porto  et  al,  2017).25  However,  a  more  in-depth  understanding  of 

22 A bogus self-employed is where a worker is registered as self-employed but, according to national definitions, should be 
registered as an employee because they effectively work mainly for one company in a situation that can be compared to 
that  of  an  employee.  Bogus  self-employment  thus  evades  the  payment  of  social  security  contributions.  No  other  new 
forms  were  uncovered  in  this  research.  It  should  be  mentioned  that  under-declared  self-employment  and  bogus  self-
employment  are  not  the same.  While  under-declared  self-employment  could  be  considered  as  a  form  of  tax-evasion,  it 
has received least mention in the literature.  

23  Hans  Dietrich,  Alexander  Patzina,  Rolf  Wank  (ed.):  Scheinselbständigkeit  in  Deutschland  –  rechtliche  Grundlagen  und 
empirische  Befunde.  IAB-Bibliothek  Nr.  364,  Bielefeld.  p.  213-460  –  English  summary.  Available  at:  https://www.iab-
forum.de/en/bogus-self-employment-in-germany-also-a-question-of-definition/ 

24 Popescu, M., Cristescu, A., Stanila, L, Vasilescu, M. (2016), Determinants of Undeclared Work in the EU Member States, 

Procedia Economics and Finance, Volume 39, 2016, Pages 520-525, 

25 Porto, E., Elia, L., & Tealdi, C. (2017), Informal work in a flexible labour market. Oxford Economic Papers-new Series, 69, 

p. 143-164. 

34 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

the  extent of the role these factors play or more in-depth research into these issues has 
not been uncovered.  

A  similar  issue  was  found  in  the  literature  discussing  the  implications  of  the  rise  of 
collaborative  platforms  on  the  size  of  undeclared  work.  The  transactions  using 
collaborative  platforms  do  not  necessarily  imply  cash  payments,  but  there  is  a  concern 
that they may expand undeclared work and bogus self-employment (Williams et al., 2020). 
For  example,  a  study  in  France  revealed  that  only  15%  of  those  using  collaborative 
platforms  declared  their income  (De  Groen  and  Maselli,  2016).26  Williams  et  al.  (2020)27 
argue  that  a  lack  of  clarity  of  regulations  and  tax  systems  leads  to  unintentional  non-
compliance. As the collaborative platforms operate often in a less clear legal environment, 
work organised by the platforms comes with a particular risk of being undeclared.28  

The  2019  Eurobarometer  survey  on  undeclared  work  revealed  that  4%  of  those  who 
admitted engaging in undeclared work in the previous year conducted all their undeclared 
work mediated by digital platforms, while 9% conducted part of their undeclared work on 
platforms  (European  Commission,  2021a).  These  findings  suggest  that  undeclared  work 
mediated  by  digital  platforms  is  not  a  minor  issue.  In  2013-2014  platform  work  was 
present in less than half of the countries in Europe, increasing now to about 1-2% of the 
workforce  in  Europe  undertaking  platform  work as  their  main  job  and  about  10%  under-
taking  platform  work  occasionally  (Eurofound,  2021).  The  number  of  digital  labour 
platforms  in the  EU increased  from  463  in  2016  to  516  in  2021 (European  Commission, 
2021b), with around 28 million people currently working through such platforms, a number 
that  is  expected to reach  43  million  by  2025 (European  Parliamentary Research  Service 
(EPRS), 2022). There is little information on the direct link between digital labour platforms 
and undeclared work (to understand if it represents a form of under-declared employment, 
bogus-self-employment or non-declared employment or activity or is a separate type). The 
2019  Eurobarometer  showed  that  13%  of  people  who  admitted  engaging  in  undeclared 
work  used  digital  platforms  for  some  or  all  of  their  undeclared  activities.  In  addition, 
platform  work  involves  undeclared  work  for  other  individuals  or  households.  As  the 
findings  suggest,  the  increase  of  non-cash  payments  does  not  always  result  in  reduced 
undeclared  work.  The  undeclared  work  conducted  via  digital  platforms  provides  an 
example of non-cash payment for undeclared work.  

Finally, the definitions of forms of undeclared work focus on the damage to social security 
and tax revenues, and on infringements of labour laws, and do not take account of other 
damage  to  workers  or  consumers.  The  literature  says  little  about  the  severity  of 
undeclared  work  and  why  it should  be  tackled.  If  the  policy  perspective was  to  focus  on 
the damage to workers (e.g., health and safety risks, risk of poverty and exploitation), or to 
take  the  perspective  of  workers  being  at  high  risk  of  ending  up  in  poverty  with  low 
earnings,  it  might  yield  other  policy  options  and  policy  perspectives.  This  typology  is 
explored  in  the  Women  in  Informal  Employment:  Globalising  and  Organising  (WIEGO) 
holistic framework on undeclared work (Figure 3Figure 3).29  

The model has been tested in developing countries (but also in developed countries such 
as  Canada)  stating  that  the  more  precarious  employment  relationships  on  which 
households  depend  were,  the  more  they  were  exposed  to  a  higher  risk  of  poverty 

26 De Groen, W.P., Maselli, I., (2016), The Impact of the Collaborative Economy on the Labour Market, Centre for European 

Policy Studies Special Report No 138, European Union, Brussels. 

27 Williams, Colin and LLOBERA VILA, MIREIA and Horodnic, Adrian (2020), Tackling Undeclared Work in the Collaborative 
or 

https://ssrn.com/abstract=3707054 

Self-Employment. 

Available 

SSRN: 

and 

at 

Economy 
http://dx.doi.org/10.2139/ssrn.3707054 

Bogus 

28  In  December,  the European  Commission  issued  a  proposal  for  a  Directive  regulating  platform  work  which  is still  under 
negotiation  in  the  European  Parliament,  October  2022  shortly  before  the  EMPL  Committee  vote.  Accessed  here: 
https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)698923 

29  Chen,  M.A.  (2007)  Rethinking  the  Informal  Economy:  Linkages  with  the  Formal  Economy  and  the  Formal  Regulatory 
at: 
No. 

ST/ESA/2007/DWP/46. 

Available 

DESA 

Paper 

46 

Environment, 
https://www.un.org/esa/desa/papers/2007/wp46_2007.pdf 

Working 

35 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

compared  to  those  that  work  in  regular  employment  (indefinite  contracts).  Even  in  the 
informal  economy  it  is  employers  that  have  the  highest  average  earnings  compared  to 
those  that  are  own  account  operators  (self-employed/free-lancer).  The  more  households 
depend on flexible employment forms with lower average earnings the higher their risk of 
being in poverty (also due to more limited access to social protection schemes). The more 
vulnerable  economically,  the  higher  also  the  exposure  to  the  informal  economy,  a 
hypothesis confirmed also by OECD (2019) research30 focussing on developing countries. 
They  do  not  only  have  a  higher  risk  of  poverty  but  also  higher  health  and  occupational 
risks.  This  indicates  the  importance  of  household  level  earnings  but  also  that  earnings 
from flexible employment are in general the source of lower and less regular earnings. 

Figure 3.  WIEGO holistic framework – Six-Segment Model, Segmentation of informal 

employment by average earnings, sex, and risk of poverty 

Source: WIEGO – Women in Informal Employment: Globalising and Organising (https://www.wiego.org/wiego-
network-holistic-framework)  –  from  the  UN  Women  report:  Progress  of  the  World’s  Women  2005:  Women, 
Work  and  Poverty  from  2005.  The  figure  shows  the  hierarchy  of  earnings  within  the  informal  labour  force. 
Earnings are highest for informal employers and regular informal wage workers (employee type).  

Understanding how social benefits and other policies redistribute wealth, as well as labour 
regulations, could improve the situation of vulnerable workers at higher risk of poverty and 
exclusion  while  decreasing  undeclared  forms  of  work.  Vermeylen  (2008)31  explains  that 
employment  contracts  are  embedded  in  national  systems  and  reflect  the  labour  market 
policies  and  interventions  in each Member  State,  potentially  revealing  a varying  pyramid 
of  exclusion  and  poverty.  Similarly,  a  Eurofound  publication  examining  policies  tackling 
undeclared  work  (2013)32  found  that  the  proportion  of  GDP  spent  on  social  protection 

30  OECD/ILO  (2019), Tackling  Vulnerability  in  the  Informal  Economy,  Development  Centre  Studies,  OECD  Publishing, 

Paris, https://doi.org/10.1787/939b7bcd-en. 

31  Vermeylen,  G.,  Informal  employment  in  the  European  Union,  Paper  prepared  for  WIEGO  Workshop  on  Informal 
-1  Nov  2008  Available  at:  https:// 

in  Developed  Countries,  Harvard  University,  31  Oct 

Employment 
www.wiego.org/sites/default/files/publications/files/Vermeylen_European_Union.pdf  

32  Eurofound  (2013),  Tackling  undeclared  work  in  27  European  Union  Member  States  and  Norway:  Approaches  and 

measures since 2008, Eurofound, Dublin 

36 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

benefits  has  a  strong  correlation  with  the  size  of  the  undeclared  work  economy  in  a 
country.  The  same  study  also  found  strong  negative  correlations  between  the  impact  of 
social transfers reducing the risk of poverty and the size of the undeclared work economy.  

Renov  (2004)33  highlighted  already  in  previous  European  Commission  research  on 
undeclared work that the type of female undeclared work in a country correlates with the 
type of welfare regime (egalitarian and social democratic conservative or Latin Rim34). The 
more  women  are  bound  to  a  role  of  family  tasks,  the  higher  the  risk  of  domestic 
undeclared  labour. This research points out that there  are types of undeclared work that 
would  require  focus  in  a  holistic  approach:  namely  types  of  undeclared  work  where 
typically vulnerable persons can be found, as well as those primarily dominated by women 
or  by  men.  Still,  it  also  means  that  undeclared  work  is  undertaken  by  persons  not 
necessarily vulnerable.  

Pfau-Effinger (2009) conceptualises undeclared work based on motivation35:  

  Type 1: ‘poverty escape’ – workers seeking to avoid immediate extreme poverty; 
  Type 2: ‘moonlighting’ – self-employment as a side job; 
  Type  3:  ‘solidarity  orientated’  –  exchange  of  goods  and  services  to  build  a  social 

network. 

This  clustering  may  provide  a  useful  way  to  determine  a  policy  mix  for  dealing  with 
different drivers and motivations to use undeclared work and may also help to distinguish 
risk profiles (e.g., health and safety risks for workers requiring urgent attention, or broader 
socioeconomic  risks  such  as  avoiding  extreme  poverty).  It  means  that  the  undeclared 
work typology would take as a starting point the variety of drivers.  

A  final  reflection  concerns  the  welfare  regime.  In  some  countries,  most  social  security 
provisions form part of citizens’ rights (e.g., pension schemes, universal healthcare), while 
others  link  social  security  rights  to  citizenship  and  employment,  and  still  others 
predominantly  provide  access  to  work-related  activities.  Two  factors  pose  potential 
problems  in  respect  of  undeclared  work  and  social  protection:  access  to  rights  (citizen 
versus worker), and/or the generosity of these rights (i.e., the relative weight of universal 
vs. work-related rights). Undeclared work forms are thus closely linked to national labour 
and  social  security  laws.  However,  the  focus  here  is  potentially  too  narrow  between 
standard/non-standard  work  and  risks  conflating  poverty  with  informal  undeclared  work. 
Carré (2020) highlights a more recent risk for undeclared work affecting labour markets in 
EU Member States is the emergence of types of employment that are difficult to classify in 

33 Renoy, P. (2004) Undeclared work in an enlarged Union: an analysis of undeclared work. In-depth study of specific items, 
European  Commission  study.  Available  at:  https://www.regioplan.nl/wp-content/uploads/data/file/internationaal/unde 
clared-work-2004.pdf 

34  Definitions  taken  from  Ibid  25.  “Egalitarian  and  social  democratic  welfare  regimes  are  found  mainly  in  the  Nordic 
countries. In these societies the household based, “female” type of informal employment is relatively rare. The tradition of 
housewife marriage is weak, in countries like Denmark, Finland and Sweden. There is a relatively broad system of public 
childcare  and  elderly  care  provided  by  the  welfare  state.  Because  of  the  relatively  egalitarian  income  structure,  cheap 
labour  is  rare.  Furthermore,  the  egalitarian  cultural  tradition  makes  hiring  of  subordinate  workers  for  household  jobs  or 
similar  work  culturally  not  well  accepted.  Instead,  in  Denmark,  the  welfare  state  organises  employment,  subsidised,  if 
necessary,  for  the  unemployed  in  domestic  services.”  In  the  conservative  welfare  states,  like  West  Germany,  a  broad 
undeclared work sector in the private households exists, …due to cultural orientation towards a family household based 
on  the  tradition  of  the  model  of  housewife  with  a  male  breadwinner  supported  this  development.  So  did  the  cultural 
acceptance of having subordinate workers in the household. This hierarchical structuring of social inequality, which is one 
of the characteristics of the conservative welfare regime, contributed to this development. In the “Latin Rim” countries, the 
welfare  state  suffers  from  a  number  of  deficiencies  in  the  field  of  family  policy,  e.g.  childcare  and  elderly  care  (family-
based  welfare  regime),  which  is  more  developed  in  most  West  European  countries…demand  for  domestic  services  (in 
these countries) which is to a certain extent filled in by informally employed legal and illegal female immigrants.” Cited p. 
181-182. 

35 Pfau-Effinger, B., ‘Varieties of undeclared work in European societies’, British Journal of Industrial Relations, Vol. 47, No 

1, 2009, pp. 79-99.  

37 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

the  traditional  divide  –  standard/  non-standard  and  self-employment  –  for  example 
platform workers or dependent self-employment.36  

There  is  a  need  for  further  empirical  research  that  could  provide  undeclared  work 
typologies more on the basis of drivers rather than lack/degree of formal/informality. This 
research  could  also  inform  multidimensional  clusters  of  types  of  undeclared  work,  e.g., 
differentiating  between  when  under-declared  employment  occurs,  who  uses  it,  and  in 
which  sectors,  and  how  it  is  hidden  from  public  authorities.  As yet, research  design  has 
not combined undeclared work forms with research focusing on precarious work or quality 
of  work  for  the  EU.  A  research  design  that  combines  legal,  sociological,  and  economic 
methods could provide such insights.  

Finally, another dimension that can play a role in building the typology of undeclared work 
is  the  remuneration  for  undeclared  work,  including  the  use  of  cash  and  the  increase  in 
cashless payments and cryptocurrencies. Reimers et al. (2020) argued that even if there 
is  a  link  between  the  size  of  the  informal  sector  and  cash  holdings,  its  quantitative 
importance  is  modest.  They  noted  that  reducing  the  shadow  economy  by  half  would 
decrease  the  demand  for  banknotes,  with  approximately  5%  of  total  banknotes  in 
circulation.  Seitz  et  al.  (2020)  set  out  the  hypothetical  scenario  of  abolishing  euro  cash 
altogether  and  found  that  to  do  so  would  eliminate  1.8%  of  euro  area  Gross  Domestic 
Product  (GDP)  (2017  calculations).  Earlier,  Takala  and  Virén  (2010)  also  found  that  the 
changes  in  cash  demand  do  not  correspond  to  changes  in  the  size  of  the  informal 
economy,  regardless  of  the  type  of  measurement  of  the  informal  economy.  Schneider 
(2016)  found  that  only  about  10%  of  cash  is  used  for  transactions  in  the  informal 
economy.  Unfortunately,  no  study  was 
role  of 
cryptocurrencies in the remuneration of undeclared work, or if in-kind remuneration could 
also be provided (e.g., by luxury goods or services/ events).  

that  examines 

identified 

the 

The  role  of  remuneration  and  flow  of  payment/monies  derived  from  undeclared  work  is 
similarly a less well studied topic. It may, however, play a role in detecting some forms of 
undeclared  work  (cash-in-hand  or  envelope  wages)  and  in  particular  to  determine  more 
severe  forms  of  undeclared  work  (such  as  ‘organised  undeclared  work’),  as  well  as 
including  other stakeholders  into the typology  that  are  part  of the ‘system’  of  undeclared 
work (facilitators, advertisers of undeclared work as well as users).  

Key takeaways  

The  literature  largely  distinguishes  between  unregistered  employment  and  activities, 
under-declared  work,  and  bogus  self-employment.  Under-declared  work  is  distinguished 
by  forms  of  payment,  registration  of  employees  to  authorities,  and  working  hours.  More 
complex situations such as platform work, temporary agency work, or contractual chains, 
however, cannot be clustered into one of these types. The typology lacks more concrete 
sub-types and the link to labour contracts and other characteristics.  

Another  limitation  of  the  typology  is  that  current  definitions  focus  only  on  the  economic 
damage  (missing  taxes,  social  security  contributions  etc).  It  is  not  clustered  to  take 
account of specific drivers or the risk profiles of those most vulnerable to undeclared work 
and requiring specific protection.   

Finally,  changes  in  cash  flows  do  not  seem  to  correspond  with  changes  in  the  size  of 
informal  work  economy.  Little  research  exists  to  understand  how  money  laundering  and 
corruption interacts with the size of the informal economy.  

36  Chen,  M.  and  Carré,  F  (eds.)  (2020),  The  Informal  Economy  Revisited:  Examining  the  Past,  Envisioning  the  Future, 

Routledge; Chapter 4, Carré, F  Informal employment in developed countries, p. 54 

38 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

2.2 

Drivers of undeclared work  

This  section  presents  empirical  evidence  identified  on  drivers  linked  to  each  type  of 
undeclared  work.  Drivers  describe 
the  motivations  of  workers  and  companies’ 
engagement  in  undeclared  work  but  there  are  also  wider  systemic  drivers  linked  to  the 
economy and administration. When connecting drivers with types of undeclared work, as 
well  as  policies  targeting  each type  of  undeclared  work  it  provides further  insights  into  a 
possible holistic policy approach.   

The first sub-section discusses the different theoretical positions in studies on undeclared 
work  in  order  to  establish  the  theoretical  framework.  A  second  sub-section  presents  the 
identified range of drivers associated with undeclared work.  

2.2.1 Theories on interpreting drivers of undeclared work 

Four major – often competing – theories of undeclared work exist: modernisation theory, 
neo-liberal theory, political economic theory, and institutional theory. These influence the 
interpretation  of  drivers  and  guide  assumptions  for  estimating  the  volume  of  undeclared 
work. The present section reviews the theories and provides an overview of how research 
has  been  guided  by  theoretical  assumptions  to  identify  drivers  that  increase  the 
prevalence of undeclared work.  

For much of the twentieth century, modernisation theory was the dominant explanation 
for the prevalence of undeclared work. It held that undeclared work occurred as a result of 
the  under-development  and  lack  of  modernisation  of  government.  Here,  the  prevalence 
of undeclared work is seen as a stage in the evolutionary process of the economy 
that  will  inevitably  reduce  and  ultimately  disappear  as  a  modern  formal  economy 
becomes  established.  However,  lived  practice  and  later  research  showed  that 
undeclared  work  is  a  persistent  feature  of  both  developing  and  developed  economies. 
Nevertheless,  scholars  adopting  this  theoretical  approach  provide  useful  insights  by 
identifying various structural drivers that generate a higher prevalence of undeclared work. 
These drivers include development measured in conventional terms (GDP per capita) and 
in alternative terms (e.g., household final consumption expenditure per capita, the Human 
Development  Index  and  Social  Progress  Index  (Bologna,  2014;  Eilat  and  Zinnes,  2002; 
Kayaoglu and Williams, 2017; Williams and Horodnic, 2019)), the level of modernisation of 
government,  measured  as  institutional  quality,  government  effectiveness  or  satisfaction 
with  the  government  (Omri,  2020;  Kayaoglu  and  Williams,  2017;  Putniņš  and  Sauka, 
2015; Torgler and Schneider, 2009), and corruption (Franić, 2017; Davis and Henreksen, 
2005; Krasniqi and Williams, 2017).  

The second explanation for the prevalence of undeclared work derives from the political 
economy  school  of  thought  or  the  under-intervention  theory.  According  to  this  view, 
undeclared  work  is  generated  by  inadequate  state  intervention  in  regulating  work 
and  welfare,  resulting  in  lower  protection  that  prompts  workers  to  undertake 
undeclared  work  out  of  necessity,  as  a  survival  strategy  (Chen,  2012;  ILO,  2014). 
Higher  levels  of  state  intervention  in the  regulation of  work  and  welfare should  therefore 
reduce  levels  of  poverty  and  wider  inequalities,  and,  consequently,  lower  participation  in 
undeclared work. Indeed, previous studies validated the determinants of undeclared work 
identified  in  the  political  economy  perspective,  including:  state  intervention  as  measured 
by indicators such as the total expense of the government, healthcare expenditure, social 
expenditure,  the  effect  of  redistribution  via  social  transfer,  and  active  labour  market 
policies  (ALMPs)  (Krasniqi  and  Williams,  2017;  Loayza  and  Rigolini,  2011;  Williams  and 
Horodnic,  2019),  and  indicators  of  poverty  and  inequality,  such  as  population  at  risk  of 
poverty, severe material deprivation, income inequality and Gini coefficients (Franić, 2017; 
Baric and Williams, 2013).  

39 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Conversely, neo-liberal theory or over-intervention theory argues that undeclared work 
is not a necessity-driven strategy but rather a choice made by the worker in response 
to high taxes and burdensome regulations that generate higher cost, time and effort 
to  declare  the  work  (Becker,  2004;  De  Soto,  1989,  2001;  Perry  and  Maloney,  2007). 
Previous  studies  were inconclusive on  the issue of  taxation,  with  some  studies  finding  a 
positive  association  between  the  level  of  taxation  and the  level  of  undeclared  work,  and 
others finding no correlation, or a negative association (Buehn et al., 2009; Ciccarone et 
al.,  2014;  Dell`Anno,  2007;  Teobaldelli,  2011;  Kayaoglu  and  Williams,  2017;  Williams, 
2014; Williams and Horodnic, 2017).  

Institutional  theory  has  now  become  the  dominant  explanation  for  participation  in 
undeclared  work,  as  it  both  synthesises  and  incorporates  many  of  the  tenets  of  those 
earlier theories. It holds that undeclared work is generated by the asymmetry between the 
two types of institutions that exist in all societies, namely formal institutions represented by 
the  formal  rules,  laws  and  regulations,  and  informal  institutions  representing  citizens’ 
norms and beliefs (Baumol and Blinder, 2008; Helmke and  Levitsky, 2004; North, 1990). 
As  such,  undeclared  work  occurs  when  there  is  an  asymmetry  between  laws  and 
regulations  and  what  citizens  and  businesses  find  acceptable  (i.e.,  informal 
institutions).  Tackling  undeclared  work  requires  the  identification  and  remedying  of  the 
causes  of  this  asymmetry,  which  implies  determining  the  features  of  the  formal  and 
informal institutions that contribute to higher participation in undeclared work. Institutional 
theory  covers  four  categories  of  formal  institutions’  characteristics  that  are  seen  as 
driving undeclared work: 

  Formal institutional resource misallocations and inefficiencies (i.e., a government’s 

lack of modernisation and high levels of corruption);  

  Formal institutional voids and weaknesses (i.e., limited state intervention in work 

and welfare);  

  Formal institutional powerlessness (i.e., lack of law and regulation enforcement 

capacity and incentives); 

  Formal institutional instability and uncertainty (i.e., frequency of changing laws and 

regulations) (Williams, 2017). 

Moving  to  the  characteristics  of  informal  institutions  and  their  relationship  with  higher 
participation  in  undeclared  work,  it  is  important  to  understand  the  extent  to  which 
various  practices  of  undeclared  work  are  deemed  socially  acceptable  by  workers 
and  employers.  The  most  common  indicators  used  to  measure  the  acceptability  of 
undeclared  work  are  tax  morale,  often  defined  as  the  intrinsic  motivation  to  pay  taxes 
(Torgler,  2012;  Torgler  and  Schneider,  2007),  the  notion  of  civic  duty  (Orviska  and 
Hudson,  2003),  and  non-financial  factors  that  determine  tax  compliance  (Luttmer  and 
Singhal,  2014).  Earlier  findings  supported  this  view  that  a  low  level  of  tax  morale  is 
associated with higher participation in various forms of non-compliant behaviour, including 
unregistered  employment  (Feld  and  Larsen,  2012;  Williams  and  Horodnic,  2016; 
Windebank  and  Horodnic,  2017)  or  under-registered  employment  (i.e.,  envelope  wages) 
(Franić, 2017; Williams and Horodnic, 2015).  

Another key driver directly and indirectly influencing participation in undeclared work 
(through  shaping  tax  morale)  is  represented  by  the  level  of  trust  (Horodnic,  2018). 
Studies revealed a strong association between participation in undeclared work and a low 
level of vertical trust, i.e., citizens’ trust in public institutions such as the government, the 
legal  system  and  tax  authorities  (Franić,  2017;  Williams  et  al.,  2017;  Williams  and 
Horodnic, 2019) and horizontal trust, i.e., citizens’ trust in their peers’ compliance (often 
measured  by  perceptions  of  the  spread  of  undeclared  work)  (Ciccarone  et  al.,  2014; 
Horodnic and Williams, 2022).  

40 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

As  the  dominant  theory explaining participation  in  undeclared  work,  institutional theory 
incorporates  the  most  important  tenets  of  the  three  earlier  theories,  moving  away 
from  the  structural  conditions  generating  participation  in  undeclared  work  towards 
individual agency, in order to account for the fact that in an environment characterised by 
the same structural conditions, some individuals decide to participate to undeclared work 
and  others  do  not. Table  2 summarises  the  four  theories, together with their drivers  and 
corresponding policy approaches. 

These theoretical approaches facilitate the understanding of the different perspectives on 
undeclared work and the angle of approach for policy interventions to reduce or transform 
undeclared work. 

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EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Table 2.  Overview of institutional theory explaining participation in undeclared work and policy approaches for tackling undeclared work 

Theory/ 
perspective 

Driver for 
undeclared work 

Sub-drivers 

Explanation/link to undeclared 
work participation 

Policy examples 

A. FORMAL INSTITUTIONAL CHANGE 

Area for change 1: Formal institutional resource misallocations and inefficiencies 

Modernisation 
perspective 

Economic under-
development 

There is a surplus of labour supply and some 
groups of workers (e.g., vulnerable workers, 
unskilled workers, migrants) are excluded from 
the formal economy until economic progress 
and modernisation take place 

Actions to tackle wider structural economic and 
social determinants of undeclared work: 

Improve GDP per capita 

Improve household final consumption per capita 

Improve Human Development Index (HDI) 

Improve Social Progress Index (SPI) 

Increase productivity 

Enhance entrepreneurship and enterprise 
culture 

Lack of 
modernisation of 
the government 

Lack of 
redistributive justice 

Citizens do not believe they receive the public 
goods and services they deserve for the taxes 
they pay 

Customer-friendly initiatives (enforcement 
agencies treat citizens in a respectful, impartial, 
and responsible manner): 

Lack of procedural 
justice 

Citizens feel that the public authorities adopt 
an adversarial approach 

Improve redistributive justice 

Improve procedural justice 

Improve procedural fairness 

Lack of procedural 
fairness 

Citizens perceive that the taxes they pay are 
not fair compared to those paid by other 
citizens 

Information to citizens on how their taxes are 
used 

Corruption and 
bribery 

Misuse of public 
office for private 
gain 

Citizens perceive that they are being extorted 
by public officials demanding or receiving gifts 
and bribes 

Tackle bribery and corruption 

42 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Theory/ 
perspective 

Driver for 
undeclared work 

Sub-drivers 

Explanation/link to undeclared 
work participation 

Policy examples 

State capture 

Citizens perceive that the resources available 
for public goods and services are reduced due 
to powerful groups that influence the 
formulation of laws and policies to their own 
advantage and enable them to gain 
preferential treatment and resources 

Personal 
connections  

Citizens perceive that other citizens do not 
comply with formal rules and use personal 
connections to get preferential access to public 
services (e.g., education, health services) 

Area for change 2: Formal institutional voids and weaknesses 

Neo-liberal 
perspective  

Burdensome 
regulatory 
environment 

Citizens voluntarily decide to exit the over-
regulated formal economy with its high taxes 
and large number of state-imposed institutional 
constraints that generate higher cost, time, and 
effort to operate in the formal economy 

Political economy 
perspective 

Lack of worker 
protection 

Citizens are excluded from the declared 
economy due to low levels of state intervention 
in work and welfare provision, which does not 
offer adequate protection to the worker and 

43 

Reduce regulations: 

Reduce intensity of regulation 

Reduce bureaucracy 

Reduce regulatory burden (usually de-
regulation not better regulation) 

Reduce tax rates: 

Reduce current taxes on income and wealth, 
etc. 

Reduce tax revenue as a % of GDP 

Reduce total tax rate as a % of GDP 

Reduce share of direct and/or indirect taxation 
(% GDP) 

Reduce taxation on labour 

Increase intervention in work and welfare, and 
reduce inequalities and poverty: 
Increase health expenditure 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Theory/ 
perspective 

Driver for 
undeclared work 

Sub-drivers 

Explanation/link to undeclared 
work participation 

Policy examples 

gives them no other choice than to participate 
in undeclared work as a survival strategy 

Area for change 3: Formal institutional powerlessness 

Lack of capacity to 
enforce formal rules 

Weak deterrence 
measures  

Citizens’ participation in undeclared work is 
explained by low costs/consequences (i.e., 
low level of actual and/or perceived 
deterrents) 

Lack of ability to 
provide incentives 
to encourage 
adherence to formal 
rules 

Low benefits of 
operating in 
undeclared sector  

Citizens participate in undeclared work 
because they perceive low benefits for 
compliance. Incentives and rewards are 
required to increase the benefits of operating 
in the declared sector and to encourage 
compliant behaviour  

44 

Improve social protection 

Increase ALMPs 

Improve public employment services 

Reduce income inequalities 

Pursue labour market policies to reduce both in-
work and out-of-work poverty  

Enhance employment participation rate 

Enhance deterrence measures in enforcement 
authorities and increase power of authorities: 

Implement more effective sanctions (e.g., 
penalties and fines for employers or companies 
to deter participation in undeclared work; 
penalties that transform undeclared work into 
declared work; penalties for citizens or 
businesses who buy goods or services from the 
undeclared economy) 

Improve the risk of detection (e.g., workplace 
inspections, data mining and matching, risk 
assessment, coordination across government 
departments) 

Make it easier to engage in declared work and 
44ncentivize declared work: 

Supply-side incentives (e.g., simplify 
compliance through easier registration 
procedures, simplify forms, formal advice and 
support, direct tax incentives, targeted VAT 
reduction) 

Demand-side incentives (e.g., service vouchers, 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Theory/ 
perspective 

Driver for 
undeclared work 

Sub-drivers 

Explanation/link to undeclared 
work participation 

Policy examples 

Area for change 4: Formal institutional instability and uncertainty 

Instability and 
uncertainty of 
formal rules 

Continuous 
changes in laws 
and regulations 

B. INFORMAL INSTITUTIONAL CHANGE 

High acceptability of 
undeclared work 
(high asymmetry 
between formal and 
informal institutions 
or low tax morale) 

Low vertical trust 

Low horizontal trust 

Citizens experienced continuous changes in 
the formal rules and thus do not expect that 
the current regulations will remain in force for 
the medium and long term. They perceive 
little benefit in paying social contributions, 
given that they do not believe that future 
regulations will allow them to benefit from 
unemployment benefits, pensions, etc. 

Citizens participate in undeclared work due to 
the low trust in public institutions such as the 
government, the legal system, and tax 
authorities. 

Citizens participate in undeclared work 
because they do not expect their peers to be 
compliant. They perceive that a large share 
of the population engages in undeclared work 
and/or personally know people engaged in 
undeclared work and are therefore more 
likely to adopt the same behaviour (social 
norm) 

targeted direct and indirect tax incentives such 
as rebates and VAT reductions)   

Provide better predictability of regulations 

Reduce frequent changes in regulations 

Improve regulation applicability for medium and 
long term 

Education and awareness campaigns to 
increase trust and enhance voluntary 
compliance: 

Information units in enforcement authorities 

Advisory inspections 

Education in schools on tax, social insurance, 
and labour law 

Awareness-raising campaigns to increase 
voluntary compliance (e.g., benefits of declared 
work, issues related to purchasing undeclared 
goods and services) 

Campaigns to improve horizontal trust in other 
citizens (e.g., competing firms, other citizens) 

Campaigns to improve vertical trust in 
government 

Source: Abridged and adapted from Williams (2017), Horodnic and Williams (2019) and Williams and Puts (2017).

45 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

2.2.1.1  Results of the review of determinants of undeclared 
work 

Using a meta-analysis approach and reviewing the available empirical research, the study 
team  was  able  to  confirm  a  limited  number  of  characteristics  (drivers)  by  research 
identified (see Table 3) as being relevant. These characteristics were clustered within the 
conceptual  framework  of  institutional  theory,  separating  socioeconomic  characteristics, 
formal institutional drivers, and informal institutional drivers.  

Table 3.  Determinants identified in reviewed publications on undeclared work 

I. SOCIOECONOMIC CHARACTERISTICS 

Worker/employee characteristics  Firm characteristics 

Category of 
driver 

Characteristics 
identified in 
literature 

Firm size (no. of employees, 
turnover) 
Sector 

Age 

Education level 
Gender 
Marital status 
Political ideology/views 
Psychological factors (e.g., 
emotions, anger)  
Sector 
Financial situation 

II. FORMAL INSTITUTIONS 

Category of 
driver 
Area of change  II.1. FORMAL INSTITUTIONAL RESOURCE MISALLOCATIONS 

AND INEFFICIENCIES 
II.1.1. Level of modernisation of government 
Satisfaction with tax system 

Driver 
Characteristics 
identified in the 
literature 

II.1.2. Formal institutions acting in a corrupt manner 
Control of corruption 
II.2. FORMAL INSTITUTIONAL VOIDS AND WEAKNESSES 
II.2.1. Modernisation explanation – Level of ‘development’ 
II.2.2. State intervention 
Welfare systems 
II.3. FORMAL INSTITUTIONAL POWERLESSNESS 
II.3.1. Lack of capacity to enforce policies 
II.3.2. Lack of power in ability to provide incentives to 
encourage adherence to the formal rules 
II.3.3. Lack of trust in authorities 
II.4. FORMAL INSTITUTIONAL INSTABILITY AND UNCERTAINTY 

III. INFORMAL INSTITUTIONS 

Tax moral 

Note: formal and informal (institutions) drivers grouped according to Williams and Horodnic (2020).  

46 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

While  a  wide  variety  of  characteristics  (more  than  32)  were  identified  in  the  available 
literature  only  a  very  limited  number  of  characteristics  could  be  confirmed  as  relevant. 
This does not mean that other characteristics, as well as the category of drivers and areas 
for  change  identified  by  institutional  theory  are  not  valid.  It  means  only  that  when 
conducting  a  meta-evaluation  of  all  characteristics  the  empirical  evidence  (focusing  on 
developed countries) is currently limited to confirm the statistical relevance. This points to 
a  need  for  additional  research.  Regarding  the  types  of  undeclared  work,  the  next  sub-
section will explain in more detail the characteristics identified as relevant also.  

Key takeaway 

There are four dominant theories that influence empirical research in the identification of 
drivers and determinants increasing participation and volume of undeclared work: 
modernisation theory, political economy theory or the under-intervention theory, neo-
liberal theory or over-intervention theory, and institutional theory.  

The  dominant theory  present  in  recent research  is  institutional  theory  which  combines 
elements of the other theories. It explains that undeclared work occurs when there is an 
asymmetry  between  what  is  presented  in  laws  and  regulations  and  what  citizens  and 
businesses find acceptable (in terms of regulation). This theory identifies four areas of 
formal institutional change or determinants that lead to an increase in undeclared work 
in combination with what citizens and businesses find socially acceptable.  

Conducting  a  meta-analysis  of  the  available  empirical  evidence  on  drivers  led  to  a 
cluster of confirmed drivers. Placing the latter into the cluster of determinants based on 
institutional theory it demonstrates more visually the available limited empirical evidence 
of  drivers  that  from  a  statistical  point  of  view  are  most  likely  to  increase  undeclared 
work. Hence, more research is required to fully confirm theoretical assumptions.  

2.2.2 Socio-demographic and other individual-specific drivers of 

undeclared work  

Several  determinants  influence  the  individual  motivation  for  participation  in  undeclared 
work. This step of the research calculated the percentage of research studies that found a 
positive effect, a negative effect, and no effect at all on the motivation for participation in 
undeclared  work for  each  determinant/characteristic. This  section  presents the results  of 
that analysis for the following types of undeclared work: unregistered employment, under-
declared  employment,  bogus  self-employment,  and  ‘other  violations’  that  encompass 
atypical  forms  of  labour  law  and  tax  violations  (i.e.,  any  non-compliance  other  than 
unregistered  employment,  under-declared  employment,  bogus  self-employment, 
undeclared  self-employment,  undeclared  work  by  companies,  and  the  purchase  of 
undeclared goods and services). 

Most studies analysing the determinants of undeclared work centre on socio-demographic 
characteristics of labour suppliers, with factors such as age, gender, and education found 
to play a significant role. For instance, there is a strong indication that men are far more 
likely  to  engage  in  under-declared  employment  than  women.  More  specifically,  103 
studies  found  that  women  are  less  likely  to  receive  envelope  wages,  while  15  studies 
identified no difference for gender. Two papers highlighted that women are more likely to 
engage in under-declared work. This difference can be explained by the sectoral focus in 
such  papers. Gender  appears  to  be  a more relevant  factor  in  newer  EU  Member  States 
than  in  the  EU-1537.  This  may  however  be  due  to  limited  evidence  and  research 
conducted with focus on the EU-15. 

37 Refers to 15 pre-2004 EU Member States: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, 

Luxembourg, the Netherlands, Portugal, Spain, Sweden, the United Kingdom 

47 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

A closer examination of the studies reviewed revealed that gender plays both a direct and 
indirect role. While men prevail in professions and/or sectors that are more susceptible to 
wage  under-reporting,  the  effect  of  gender  remains  significant  even  after  controlling  for 
this  variable.  While  meta-regression38  allows  for  direct  and  indirect  effects  to  be 
disentangled, the insufficient sample size made it unfeasible here. 

The results concerning gender are not overly clear in respect of the types of undeclared 
work. For instance, the majority of studies found that  gender is  not a significant driver of 
unregistered  employment.  The  same  is  true  for  bogus  self-employment,  but  only  at  EU 
level. When large-scale studies of some non-EU countries are included, the balance shifts 
towards men being slightly more likely to engage in bogus self-employment. That finding 
should be read cautiously, however, given the small number of studies analysing the link 
between gender and participation in bogus self-employment.  

Age  is  another  frequently  examined  determinant  of  undeclared  work.  The  bulk  of  the 
sources  found  a  negative  relationship  between  age  and  the  tendency  to  engage  in 
undeclared work, suggesting that older individuals are less willing to violate the legislation. 
This is particularly evident for under-declared employment, with 126 studies from the EU 
finding a significant negative effect of age and only 11 concluding the opposite.  

The  exception  is  bogus  self-employment  where  the  majority  of  studies  found  that  older 
individuals  are  more  likely  to  engage  in  this  practice.  These  results  are  expected,  given 
that bogus self-employment frequently emerges from a standard employment relationship. 
It  usually  takes  some  time  for  both  parties  to  develop  mutual  trust,  which  is  the  key 
precondition for bogus self-employment.  

Age  also  appears  to  exert  both  direct  and  indirect  effects  on  the  likelihood  of  violating 
labour  and  tax  legislation.  Following  a  regression  analysis  (the  authors  of  the  current 
study  included  some  other  determinants  such  as  marital  status  and  education  in  the 
model),  the  role  of  age  remained  statistically  significant,  suggesting  that  workers’ 
motivations  to  engage  in  such  violations  are  influenced  by  their  life  experiences  within 
their particular age group.   

Certain non-categorical variables, such as marriage, pose challenges when attempting to 
systematise  these  findings.  Following  the  recoding  of  marital  status  into  two  categories 
(married and not-married), married individuals were compared to the rest of the population 
(i.e., individuals that are single, widowed, cohabiting, and other types of partnership). The 
analysis showed that married individuals do not typically differ from other groups in terms 
of the likelihood of participating in standard types of undeclared work. This does not hold 
for  other  violations,  with  the  majority  of  studies  finding  married  individuals  less  likely  to 
engage. 

A  similar  pattern  is  visible  for  the  effect  of  education.  For  instance,  none  of  the  studies 
concluded that higher education entails a higher tendency to work without any contract or 
to  engage  in  less  frequent  types  of  undeclared  work.  However,  the  number  of  papers 
revealing a negative effect was comparable to those finding no effect. Although ‘no effect’ 
predominates for under-declared employment and bogus self-employment, the results for 
the remaining two outcomes (positive and negative) are somewhat different. For instance, 
there  is  some  evidence  that  bogus  self-employment  might  be  more  prevalent  among 
highly educated individuals than among unskilled individuals. In addition, the quasi-formal 
realm  appears  to  embrace  both  low-paid  workers  and  those  in  the  upper  tier  of  the 
workforce.   

Unfortunately, the resulting dataset does not provide a satisfactory amount of information 
on  the  effects  of  household  size  and  the  size  of  settlement  (rural/urban).  From  these 
rather small numbers of available studies, it can only be hypothesised that neither variable 

38 Meta-regression  uses  regression  analysis to combine, compare, and  synthesize research findings from  multiple studies 

and their corresponding data sets.  

48 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

plays  a  particularly  significant  role  in  the  decision-making  process  of  economic  agents 
with respect to (non-)declaration of activities.  

Key takeaways 

While  the  analysis  reveals  that  gender,  age,  and  education  clearly  play  a  direct  and 
indirect  role  in  undeclared  work  the  available  evidence  can  demonstrate  only  the 
obvious. Only a few pointers are of interest: 

  Men  tend  to  be  more  prevalent  in  under-declared  work  (this  can  depend  on 
sector  specific  situations  depending  on  whether  it  is  female  or  male  dominated 
sector), but no significant influence is found for unregistered employment. 

  Younger  individuals  are  generally  more  likely to participate  in  undeclared  work. 
This,  however,  does  not  apply  to  bogus  self-employment,  which  is  more 
prevalent among experienced workers.  

  From the available evidence it is not possible to establish a general link between 
level  of  education  and  provision  of  undeclared  work.  Rather,  limited  evidence 
points  out  that  bogus  self-employment  might  be  more  prevalent  among  those 
with  higher  levels  of  education than  among those with  lower  levels. In  addition, 
the  quasi-formal realm appears to embrace both low-paid workers and those in 
the upper tier of the workforce. 

2.2.3 Economic and wider systemic drivers of undeclared work 

The  size  of  the  company  appears  to  be  a  strong  negative  predictor  of  undeclared  work. 
This primarily applies to under-declared employment, as the majority of studies found that 
this  typically  occurs  in  micro  and  small  companies.  These  results  are  unsurprising,  as 
owners of small-scale businesses find it much easier to extract cash from the system and 
to  develop  mutual  trust  with  their  employees.  The  lack  of  evidence  concerning  the 
relationship of bogus self-employment and size of the company is understandable due to 
complex set-ups making estimates difficult.  

The  lack  of  data  on  sectors  is  problematic.  Rarely  evaluated  in  research  studies,  an 
additional  limitation  was  imposed  by  methodological  divergence,  with  many  authors 
commonly  including  only  a  few  sectors  in  their  analysis,  for  example.  The  reference 
category was usually determined by convenience, often making it impossible to rearrange 
the extracted data into comparable units. Despite these obstacles, it was possible to draw 
conclusions about two key sectors – construction and agriculture, which are highly prone 
to  undeclared  work.  This  holds  in  the  case  of  unregistered  employment,  quasi-formal 
employment, and bogus self-employment. No significant effect was found for other types 
of violations. 

Although a non-negligible number of studies concluded that immigrants are more likely to 
work  fully  or  partially  undeclared  compared  to  individuals  born  in  the  country  of  work,  a 
larger proportion of those suggest that this aspect is not relevant. Rather, it is the ability to 
make  ends  meet  that  dominates,  with  the  majority  of  studies  finding  a  firm  link  between 
financial situation and readiness to participate in undeclared work – people who struggle 
to pay their bills or debts are more likely to seek additional off-the-book revenues. Bogus 
self-employment is the only exception, with every study concluding that there is no direct 
link between these two variables. 

The  findings  further  suggest  that  people’s  subjective  beliefs  are  at  least  as  important  as 
socio-demographic  and  economic  factors  in  beginning  and  sustaining  undeclared  work. 
For example, most studies found that people who believe that public administration does a 
satisfactory  job  are  less  likely  to  engage  in  illegitimate  economic  transactions  than 
individuals  disappointed  with  public  institutions.  The  majority  of  studies  also  found  a 
negative association between trust in the authorities and willingness to operate informally. 

49 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

In  other  words,  higher  trust  entails  a  lower  predisposition  to  seek  tax  evasion  strategies 
and to avoid participation in undeclared work.  

Tax morale was found to exert a negative effect on the likelihood of working undeclared, 
with 84 of 93 studies concluding that people with a high intrinsic willingness to pay taxes 
are  less  likely  to  accept  envelope  wages.  Only  five  studies  found  the  opposite.39  The 
same  is  true  for  less  frequent  types  of  non-compliance,  although  there  is  a  lack  of 
evidence  for  unregistered  employment  and  bogus  self-employment.  The  same  limitation 
exists in the case of corruption, with few studies available to be evaluated.  

Chapter  3  describes  the  available  research  on  the  volume  and  scale  of  the  economic 
damage caused by undeclared work.  

Key Takeaways 

In relation to the economic and wider systemic drivers of undeclared work, systematised 
findings failed to provide a clear answer about the relevance of the tax burden.  

Despite limited data, some important economic, cultural, and wider systemic drivers of 
undeclared work were evident. For instance, there is evidence of undeclared work being 
more prevalent in small and micro companies, particularly in businesses operating in 
agriculture and construction. The analysis also highlighted the lack of financial resources 
as an important factor encouraging workers to engage in undeclared work. Migrant or 
immigrant background was found as having no significant effect on undeclared work.  

Although some workers participate in undeclared work out of necessity, others do so 
simply to defy the authorities and/or to increase their wealth. Dissatisfaction with the work 
of public administration, distrust in the authorities, and low tax morale are the most 
important motivators.  

Nevertheless, there is an important gap in the literature in respect to other systemic 
drivers, which prevented drawing conclusions on the role of corruption, repression, rule of 
law, ease of doing business, quality of social security, the viability of the pension system, 
and other country-level peculiarities mentioned in the literature as likely determinants of 
undeclared work.  

39 The fact that people strongly opposing tax evasion are sometimes more likely to work on an undeclared basis compared 
to  the  rest  of  the  population  implies  that  tax  morale  is  important  but  not  the  decisive  determinant.  As  many  labour 
suppliers find undeclared work the only means of escaping from poverty, they are forced to go against their moral values. 

50 

 
 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

3  Overview of recent estimates of the volume of 
undeclared work and scale of damage created 

The following section outlines the meta-analysis undertaken to estimate the volume of 
undeclared work and the scale of economic damage caused by undeclared work.  

3.1 

Overview of estimates of volume of undeclared 

work in contemporary research 

Studies estimating the volume of undeclared work draw their data from a range of different 
aspects of undeclared work including tax and social security non-compliance, labour law 
non-compliance,  levels  of  unregistered  employment.  They  also  use  various  hypotheses 
and  assumptions  to  estimate  the  scale  of  undeclared  work.  The  results  presented  here 
bring together the results from the literature reviewed. 

In total 141 studies have been reviewed including estimates on volume. While the scope 
of this exercise included ‘developed countries’, three studies have been included into the 
sample  that  went  beyond  this  remit  including  also  developing  countries.  The  majority  of 
papers,  however, focus on  not  only one  country but a combination  of countries. Only  20 
papers  included  estimates  for  one  specific  country,  including  estimates  for  Italy,  France, 
US,  Poland,  Austria,  Denmark,  Russia,  Turkey,  Ukraine,  Greece,  Latvia,  Romania, 
Croatia, Hungary, and Czech Republic.  

All  papers  together  included  556  models  to  estimate  the  share  of  informal/  undeclared 
work. Share of the working population was the unit of analysis most frequently used to 
determine  the  volume  of  undeclared  work,  used  in  over  288  models.  The  share  of  GDP 
was  also  employed  often,  in  178  models.  The  share  of  total  population  was  calculated 
34  times,  while  the  share  of  Gross  Value  Added  (GVA)  was  used  13  times.  Thirty-two 
models based their measures of the volume of undeclared work on other variables, such 
as revenue, gross income, or the share of self-employed.  

There is considerable variability in the values reported for undeclared work as a share of 
GDP.  Combining  all  models  from  the  papers,  on  average,  undeclared  work  represents 
33.9% of GDP in developed countries, with the median somewhat lower, at 25.3%. Most 
model works with e values under 34.8% for developed countries. Focusing specifically on 
the  volume  of  under-declared  employment  and  envelope wages, the  various studies 
reported values of 22.3% of GDP on average for developed countries across the relevant 
models.  The  volume  of  under-declared  employment  and  envelope  wages  was,  on 
average, reported at 6.8% of the working population and 8.2% of the total population. 
This finding is anomalous as the total population includes age groups that typically would 
not participate in any type of paid work. The results are not comparable between GDP and 
working  age  population,  and  total  population  as  they  may  not  be  drawn  from  the  same 
papers. This highlights the limitations of the available  information to draw conclusions or 
make  comparisons,  as the data  vary  significantly  in  terms of time  periods  and  locations. 
The median values reached 20.4% of GDP, 5.6% of the working population, and 5.0% of 
the total population. The range of volume measures appeared more restrained compared 
to  considering  all  types  of  undeclared  work  at  once:  the  volume  of  under-declared 
employment  and  envelope  wages  ranged  between  2.8%  and  50.0%  of  GDP,  3.0%  and 
40.0% of the working population, and 3.4% and 39.3% of the total population. Due to the 
wide  range  of  geographical  regions  and  time  periods  covered  by  the  various  datasets, 
measures  of  the  volume  of  different  types  of  undeclared  work  varied  greatly.  This 
prevents  any determination of precise values for volumes of undeclared work for the EU 
Member  States  as  a  whole  and  individually.  Rather,  a  preferred  approach  would  be  to 
obtain  data  on  engagement  in  undeclared  work  in  the  EU-27  from  other  datasets 

51 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

analysing  the  same  issue  across  all  countries,  especially  if  the  volumes  are  to  be 
based on the same types of data and comparable across countries.  

To discuss the trends in the EU Member States on volume of undeclared work five recent 
studies  providing  estimates  of  the shadow  economy  and  undeclared work  for the  EU  27 
were  selected  using  the  same  method  over  time  (see  Table  4).  Despite  the  varying 
definitions,  results  are  somewhat  similar  across  the  studies.  Looking  at  the  shadow 
economy40 (based on 2017 figures by Medina and Schneider (2019)), the average size of 
the  shadow economy in the EU-27  was 16.3% of GDP at market prices (current prices). 
As  a  proportion  of  GDP,  the  2017  estimates  for  the  shadow  economy  were  highest  in 
Cyprus,  Greece,  Romania,  Bulgaria,  and  Croatia,  with  the  lowest  shares  in  Austria,  the 
Netherlands,  Luxembourg,  and  Ireland.  Based  on  the  2019  figures  by  Franic,  Horodnic, 
and Williams (2022) using the Labour Input Method (LIM) the share of undeclared work in 
the EU-27 represented on average 14.8% of GVA.   

40 The  definition used for shadow  economy includes activities that as such  are  not  illegal  but  use  illegal practices such  as 

employment of illegal migrants, as well as illegal activities.  

52 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Table 4.  Estimated scale of undeclared work in the European Union 

Shadow 
economy1), 
2017 

Shadow 
economy2)  
2022 

Undeclared work (LIM 
estimates)3), 2013 

Undeclared work (LIM 
estimates)4), 2019 

(% GDP) 

(% GDP) 

(% GVA) 

(% labour 
Input) 

(% GVA) 

(% labour 
Input) 

Demand for 
undeclared 
work5), 2019 

Supply of 
undeclared 
work5), 2019 

Envelope wages5), 2019 

(% respon-
ses)  

(% respon-
ses) 

(% respon-
ses) 

(% gross 
salary) 

Eurobarometer 2019 

16.3

16.5

22.9

11.7

11.7

10.4

20.1

9.6

24.8

20.3

11.7

22.7

19.8

25.2

16.3

8.7

10.1

20.9

15.8

14.2

20.3

16.4

15.4

19.2

16.9

14.3

7.1

21.3

13.0

22.5

17.9

11.0

17.1

17.2

17.9

11.6 

11.9

17.8

7.7

9.6

4.4

14.8

8.6

12.4

8.8

8.8

14.2

12.9

13.8

11.1

10.8

19.3

7.0

8.6

3.9

12.2

7.3

12.6

6.7

11.8

10.7

12.6

8.6

14.8

14.0

23.8

9.6

9.3

8.6

16.4

11.1

18.8

16.5

13.6

13.5

20.4

10.6

53 

11

16

17

16

16

7

13

14

27

9

8

18

12

16

4

6

5

4

8

3

6

5

3

4

4

3

3

1

3

6

6

3

3

2

4

4

6

4

2

4

4

3

27

26

38

15

15

24

56

19

44

22

21

24

30

47

Country 

Total EU-
27 

Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Latvia 

Lithuania 

Luxembou
rg 

Hungary 

Malta 

Netherlan
ds 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

Notes:  

18.0

19.7

8.8

19.8

18.6

8.8

7.1

19.9

16.1

23.0

19.0

13.1

10.8

10.7

22.3

25.2

9.1

23.2

18.3

19.8

5.4

17.3

No data 

No data

8.2

6.6

15.7

10.8

10.8

11.9

10.0

27.3

15.5

26.2

16.4

14.7

11.8

9.7

5.2

8.7

20.8

6.6

18.9

13.2

13.4

9.3

7.7

14.9

26.0

7.0

20.1

23.4 

12.8

5.3

19.7

12.0

27.1

13.0

14.5

9.9

7.5

14.0

20.8

6.7

16.0

17.9

4.8

5.1

16.0

7.5

21.7

10.8

12.1

7.8

5.3

21

16

13

15

30

27

12

5

16

7

11

12

14

13

6

3

7

4

1

10

4

1

3

2

5

3

3

7

7

3

3

6

1

1

2

5

3

5

3

4

1

2

40

44

No data

36

100

7

27

32

41

16

18

34

10

9

1) Medina, L. and Schneider, F., Shedding light on the shadow economy: a global database and the interaction with the official one, CESifo Working Paper No. 7981, Munich: Munich Society for the Promotion of 
Economic Research – CESifo, 2019. | Details | Shadow Economy Data | unweighted average for total EU-27. 

2) Schneider, F. And Boockmann, B., Die Größe der Schattenwirtschaft – Methodik und Berechnungen für das Jahr 2022, 2022. Available at: https://www.iaw.edu/pressemitteilungen-detail/deutlicher-rueckgang-der-
schattenwirtschaft-in-deutschland.html  

3)  Williams, C.C., Bejakovic, P., Mikulic. D., Franic, J., Kedir, A. and Horodnic, I.A., An evaluation of the scale of undeclared work in the European Union and its structural determinants: estimates using the Labour Input 
Method (LIM), Brussels: European Commission, 2017 | Details and Undeclared Work Data | EU average includes UK (EU-27 + UK). 

4)  Franic, J., Horodnic, I.A. and Williams, C.C., Extent of undeclared work in the European Union, European Labour Authority, European Platform tackling undeclared work, 2022. 

5) European Commission, Special Eurobarometer 498 – September 2019 (Wave EB92.1). Undeclared Work in the European Union, Brussels: European Commission, 2020 | Details, Undeclared Work and Envelope 
Wages Data |

54 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

When  comparing  values  from  2017  and  2022  for  the  shadow  economy  (interpretation  of 
data requires caution as methods used in their calculation may differ), one trend that can 
be  identified is a reduction in the overall size of the shadow economy. However, country 
specific  variations  exist  which  indicate  that  while  the  shadow  economy  shrank  in 
Germany, Greece, Spain, Austria, and Portugal, it experienced a slight increase in Ireland, 
France  and  Italy.  The  volume  of  the  shadow  economy’s  share  of  GDP  in  Belgium, 
Netherlands, Finland, and Sweden seems to have remained unchanged.  

Comparing the values for the estimates of undeclared work as a percentage of GVA from 
2013 and 2019 a similar trend towards the decline of undeclared work can be seen. When 
comparing values at Member State level it shows that a slight increase of undeclared work 
as  percentage  of  GVA  occurred  in  Bulgaria,  Germany,  France,  Italy,  Lithuania, 
Netherlands, and Romania. 

The estimated scale of undeclared work across the EU can in some cases be related to 
categories  of  undeclared  work  (see  Chapter  2).  For  example,  the  LIM  (Labour  Input 
Method)  estimates41  measure  unregistered  employment,42  and 
‘envelope  wages’ 
corresponded to the type ‘under-declared employment’. Other study estimates, however, 
were  not  linked,  as  they  measured  more  than  one  specific  type  of  undeclared  work  or 
encompassed a larger sphere than undeclared work (the shadow economy).  

Key takeaways 

Different  studies  use  different  methods  to  estimate  undeclared  work.  The  share  of 
undeclared  work  is  expressed  most  frequently  as  a  percentage  of  the  working 
population  and,  secondly,  as  a  percentage  of  GDP.  Typically,  studies  have  multi-
country scope covering a range of geographical regions and time periods using various 
datasets.  The  result  is  that  measures  of  the  volume  of  undeclared  work  varied 
greatly  between  studies.  These  factors  limit  the  potential  to  compare  results  across 
studies and identify trends in undeclared work in EU Member States over time.  

Five  recent  studies  were  identified  that  can  be  used  to  identify  trends  in  volume  of 
undeclared work over time in EU Member States. One study estimated that the average 
size of the shadow economy in the EU-27 in 2017 was 16.3% of GDP at market prices 
(current  prices).  Another  study  estimated  that  in  2019  the  share  of  undeclared  work 
averaged 14.8% of GVA in the EU-27. Estimates show that the shadow economy and 
the share of undeclared work in the EU-27 shrunk over the past 10 years.  

Only for under-declared work or envelope wages estimates of volume exist albeit 
for the EU-27 only based on survey data.   

3.2 

Estimated economic damage created by 

undeclared work in EU countries 

This section presents estimates of the damage caused by undeclared work across the EU 
based on the estimated scale of undeclared work. No studies specifically estimated such 
damage or ranked the most damaging characteristics of undeclared work.  

Murphy’s  (2012)  approach  was  used  to  show  the  economic  damage  caused  by 
undeclared  work  to  governments  and  societies.  Based  on  the  estimated  value  of  the 
shadow economy, the total tax revenue lost is examined, with that tax loss calculated as a 

41 For explanation about this method and previous figures from 2017 please see Williams, C.C., Bejakovic, P., Mikulic, D., 
Franic,  J.,  Kedir,  A.  and  Horodnic,  I.A.,  An  evaluation  of  the  scale  of  undeclared  work  in  the  European  Union  and  its 
structural determinants: Estimates using the Labour Input Method, Brussels, European Commission, 2017. 

42 Unregistered would also be the work provided and paid outside the employment contract (e.g., informal ‘upgrading’ of a 

part-time job to full-time employment).  

55 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

percentage  of  the  government`s  spending.  The  results  provided  should  be  cautiously 
interpreted  due  to  the  fact  that  they  evaluate  the  shadow  economy  as  a  whole  (i.e., 
undeclared  work  being  only  a  part  of  it).  However,  this  approach  provides  a  broader 
understanding of the size of the analysed phenomenon. 

Based on 2017 figures by Medina and Schneider (2019), the average size of the shadow 
economy  in  EU-27  was  16.3%  of  GDP  at  market  prices  (current  prices)  (see  Table  5). 
According  to  Eurostat  data,  taxes  and  social  contributions  (defined  by  Eurostat  as  total 
receipts  from  taxes  and  compulsory  social  contributions  after  deduction  of  amounts 
assessed  but  unlikely  to  be  collected)  accounted  for  39.9%  of  GDP  in  2017.  Failing  to 
collect the taxes and social contributions as a result of the shadow economy in the EU-27 
thus  translates  into  lost  government  revenue  of  more  than  EUR 850 000  million.  Total 
government  spending  was  46.7%  of  GDP  in  EU-27.  Lost  government  revenue  of 
EUR 850 427 million represents 13.9% of total government spending. 

56 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Table 5. 

 Government revenue lost due to shadow economy in EU-27 (2017) 

Shadow 
economy2) 

GDP3) 

Country1) 

Taxes & 
social con-
tributions4) 

Gov revenue lost 
due to shadow 
economy A) 

Gov spending 
(total) as % of 
GDP5) 

Estimated gov 
revenue lost (% of 
total spending) B) 

(% GDP) 

(EUR million) 

(% GDP) 

(EUR million) 

(%) 

(%) 

Total EU-
27 

16.3 

13 076 046 

39.9 

850 427 

46.7 

Belgium 

16.5 

445 050 

44.7 

Bulgaria 

22.9 

52 531 

29.8 

Czechia 

11.7 

194 133 

35.4 

iDenmark 

11.7 

294 808 

45.7 

Germany 

10.4 

3 267 160 

39.3 

Estonia 

20.1 

23 834 

32.8 

Ireland 

9.6 

296 925 

22.6 

Greece 

24.8 

176 903 

39.4 

Spain 

20.3 

1 161 867 

34.0 

32 825 

3 585 

8 041 

15 763 

133 535 

1 571 

6 442 

17 286 

80 192 

France 

11.7 

2 297 242 

46.4 

124 713 

Croatia 

22.7 

49 889 

37.0 

4 190 

Italy 

19.8 

1 736 593 

41.8 

143 727 

Cyprus 

25.2 

20 245 

33.0 

Latvia 

18.0 

26 984 

31.1 

Lithuania 

19.7 

42 276 

29.4 

Luxembou
rg 

8.8 

58 169 

36.8 

Hungary 

19.8 

127 046 

37.9 

Malta 

18.6 

11 955 

30.2 

Netherlan
ds 

8.8 

738 146 

38.7 

Austria 

7.1 

369 362 

41.9 

Poland 

19.9 

467 427 

34.1 

Portugal 

16.1 

195 947 

34.1 

Romania 

23.0 

187 773 

24.9 

Slovenia 

19.0 

43 011 

37.3 

1 684 

1 511 

2 449 

1 884 

9 534 

672 

25 138 

10 988 

31 719 

10 758 

10 754 

3 048 

57 

52.0 

34.8 

39.0 

50.5 

44.2 

39.2 

26.2 

48.5 

41.2 

56.5 

44.7 

48.8 

36.5 

38.7 

33.2 

41.3 

46.7 

34.4 

42.4 

49.3 

41.3 

45.4 

33.5 

44.1 

13.9 

14.2 

19.6 

10.6 

10.6 

9.2 

16.8 

8.3 

20.1 

16.8 

9.6 

18.8 

17.0 

22.8 

14.5 

17.4 

7.8 

16.1 

16.3 

8.0 

6.0 

16.4 

12.1 

17.1 

16.1 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Slovakia 

13.1 

84 443 

33.9 

Finland 

10.8 

226 301 

42.9 

Sweden 

10.7 

480 026 

44.1 

3 750 

10 485 

22 651 

39.6 

53.6 

49.2 

11.2 

8.6 

9.6 

Notes:  

1) Countries listed in protocol order of EU Member States – Eurostat. 

2) Medina, L. and Schneider, F., Shedding light on the shadow economy: a global database and the interaction with the 
official one, CESifo Working Paper No. 7981, Munich: Munich Society for the Promotion of Economic Research – CESifo, 
2019 | Details | Shadow Economy Data | unweighted average for total EU-27. 

3) GDP at market prices (current prices, EUR million) | Details | Eurostat – GDP (market prices) Data, extracted June 2022 |. 

4) Total receipts from taxes and compulsory social contributions after deduction of amounts assessed but unlikely to be 
collected | Details | Eurostat – main national accounts tax aggregates Data, extracted June 2022 |. 

5) General government expenditure by function (COFOG) – Total, Public order and safety, Environmental protection, Health, 
Education | Details | Eurostat – general government expenditure Data, extracted June 2022 |. 

A) Shadow economy (% GDP) x GDP (EUR million) x taxes and social contributions (% GDP) | B) [Gov revenue lost due to 
shadow economy (EUR million) * 100] / [Gov spending, total (% of GDP) x GDP (EUR million)]. 

Source: Authors’ calculations based on data from Medina and Schneider (2019) and Eurostat 

The  same  approach  (Murphy,  2012)  was  used  to  show  the  damage  of  undeclared  work 
alone.  Based  on  the  estimated  value  of  undeclared  work,  the  total  tax  revenue  lost  was 
examined  and  the  tax  lost  (i.e.,  taxes  on  income  and  labour-related  social  contributions) 
was then calculated as a percentage of government spending.  

The first step was to obtain the figures for total taxes on income and labour-related social 
contributions  for  each  country  (see  Table  6).  Alongside  tax  revenue  from  labour  (on 
income from employment, paid by employers and employees), tax revenue on income of 
the self-employed was considered, as also undeclared work by the self-employed causes 
loses in tax revenue on income. These data were extracted from a report produced for the 
European Commission, Directorate-General  for Taxation  and Customs Union  (see Table 
8,  note  2;  details  for  the  methodology  used  are  available  in  Annex  B  in  the  Taxation 
Trends in the EU Report: Methodological and explanatory notes).  

According to Table 6 taxes on income and social contributions (labour-related) accounted 
for  20.5%  of  GDP  in  the  EU-27  in  2019.  This  share  was  converted  to  EUR  millions  and 
expressed as a share of GVA (Table 8, last column). Secondly, based on 2019 figures by 
Franic et al. (2022), the average size of undeclared work in the EU-27 was 14.8% of GVA. 
Considering the GVA value expressed in EUR millions and the share of taxes on income 
and  social  contributions  (labour-related)  in  GVA,  the  government  revenue  lost  due  to 
undeclared  work  was  then  calculated.  As  such,  not  collecting  the  taxes  on  income  and 
labour-related  social  contributions  as  a  result  of  the  undeclared  work  in  the  EU-27 
translated into EUR 425 279 million of lost government revenue.  

Table 7 shows 2019 Eurostat data on general government expenditure as a percentage of 
GDP.  Total  government  spending  was  46.5%  of  GDP  in  the  EU-27.  Assuming  that 
government  revenue  lost  due  to  undeclared  work  was  EUR  425 279  million,  that 
represented 6.5% of total government spending. 

58 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Table 6.  Taxes on income and labour-related social contributions, EU-27, 2019 

Tax revenue2): 

Labour on income from employment43  

Country1) 

Total 

of which paid by: 

employers 

employees 

Income of 
self-
employed44 

Taxes on 
income and 
social 
contributions 
(labour-
related)A) 

GDP3) 

Taxes on income 
and social 
contributions 
(labour-related) B) 

GVA4) 

Taxes on 
income and 
social 
contributions 
(labour-related) 
C) 

(% GDP) 

(% GDP) 

(% GDP) 

(% GDP) 

(% GDP) 

(EUR million) 

(EUR million) 

(EUR million) 

(% GVA) 

Total EU-27 

Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

18.4 

19.9 

11.1 

18.0 

17.9 

20.4 

16.1 

9.5 

15.0 

8.2 

7.9 

5.4 

10.0 

0.7 

6.9 

11.0 

2.6 

5.6 

10.2 

12.0 

5.7 

7.9 

17.2 

13.5 

5.1 

6.9 

9.4 

2.1 

2.3 

0.8 

1.1 

0.9 

2.1 

0.1 

0.7 

0.8 

20.5 

14 017 091 

2 873 504 

12,533,706 

22.2 

11.9 

19.1 

18.8 

478 161 

106 152 

426,900 

61 558 

7 325 

53,151 

225 569 

43 084 

203,808 

310 476 

58 369 

270,438 

22.5 

3 473 350 

781 504 

3,130,661 

16.2 

10.2 

15.8 

27 732 

4 493 

24,088 

356 526 

36 366 

335,300 

183 250 

28 954 

158,762 

22.9 

24.9 

13.8 

21.1 

21.6 

25.0 

18.7 

10.8 

18.2 

43 Taxes on employed labour income (first 3 columns in Table 8), according to the methodology used in European Commission report, 2022 edition, Taxation trends in the European Union - 
Data  for  the  EU  Member  States,  Iceland  and  Norway:  “Taxes  on  employed  labour  comprise  all  taxes,  directly  linked  to  wages  and  mostly  withheld  at  source,  paid  by  employers  and 
employees,  including  actual  compulsory  social  contributions. They  include  compulsory  actual  employers’  social  contributions  and  payroll  taxes,  compulsory  social contributions  paid  by 
employees and the part of personal income tax that is related to earned income. 
Under the definition of taxes on employed labour income adopted in this report, the categories ‘personal income tax’ and ‘social contributions’ are used in a wide sense including all other 
taxes that are susceptible to increase the cost of labour. Therefore, the recorded amount of ‘personal income tax’ in the Nordic countries not only consists of central government income 
tax, but also includes the state income tax, or municipality income tax, and sometimes also church tax. In France, the generalised social contribution (CSG) and the contribution for the 
reduction in the debt of the social security institutions (CRDS) are partially booked as income tax on labour income.” 

44 Taxes on the income of the self-employed (column 4 in Table 8), according to the methodology used in European Commission report, 2022 edition, Taxation trends in the European Union - 
Data for the EU Member States, Iceland and Norway: “The question arose whether part of the self-employed income should be treated as a remuneration of labour and whether the related 
taxes should be included in taxes on labour. The best compromise between economic rationale and data availability was to consider self-employment income to be income from capital … 
Personal income taxes, along with social contributions of the self-employed are, therefore, allocated to the capital income subcategory for the self-employed. This assumption includes the 
part of self-employment income equivalent to the remuneration of self-employment own labour.” 

59 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

Notes:  

16.1 

21.2 

13.8 

18.2 

13.9 

14.7 

13.9 

15.6 

16.5 

10.6 

15.6 

21.2 

13.4 

13.3 

11.9 

18.1 

16.0 

18.0 

22.3 

1) Countries listed in EU protocol order – Eurostat. 

9.0 

12.4 

5.6 

9.8 

8.3 

6.7 

0.7 

4.5 

6.6 

2.4 

5.5 

9.6 

5.4 

5.8 

1.0 

5.7 

9.1 

7.4 

11.9 

17.7 

1 244 375 

220 254 

1,128,481 

23.1 

2 437 635 

563 094 

2,169,269 

14.4 

55 571 

8 002 

45,754 

21.5 

1 796 634 

386 276 

1,611,354 

14.5 

15.0 

14.5 

16.4 

17.2 

11.4 

18.4 

24.1 

17.7 

13.9 

12.1 

19.6 

16.1 

19.7 

22.7 

23 010 

30 647 

48 860 

62 704 

3 336 

4 597 

7 085 

20,160 

26,692 

43,901 

10 283 

56,923 

146 113 

25 131 

123,671 

14 042 

1 601 

12,546 

813 055 

149 602 

724,960 

397 519 

95 802 

355,291 

533 600 

94 447 

469,114 

214 375 

29 798 

185,536 

223 163 

27 003 

201,790 

48 397 

94 048 

9 486 

42,329 

15 142 

84,047 

239 852 

47 251 

207,285 

476 870 

108 249 

423,512 

19.5 

26.0 

17.5 

24.0 

16.5 

17.2 

16.1 

18.1 

20.3 

12.8 

20.6 

27.0 

20.1 

16.1 

13.4 

22.4 

18.0 

22.8 

25.6 

7.1 

8.8 

8.3 

8.4 

5.6 

8.0 

13.1 

11.1 

9.9 

8.2 

10.1 

11.6 

8.0 

7.5 

11.0 

12.4 

6.9 

10.6 

10.3 

1.6 

1.9 

0.6 

3.3 

0.6 

0.3 

0.6 

0.8 

0.7 

0.8 

2.8 

2.9 

4.3 

0.6 

0.2 

1.5 

0.1 

1.7 

0.4 

60 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

2) Tax revenue: structure by economic function (% of GDP); European Commission, Directorate-General for Taxation and Customs Union (2021). Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United 
Kingdom. 1st Edition. Luxembourg: Publications Office of the European Union. | Details and Tax Revenue Data |. 

5) GDP at market prices (current prices, EUR million) | Details | Eurostat – GDP (market prices) Data, extracted June 2022 |. 

3) GVA (current prices, EUR million) | Details | Eurostat – GVA data, extracted June 2022 |. 

A) Tax revenue, labour-on income from employment, TOTAL (% GDP) + tax revenue, income of self-employed (% GDP) | B) Taxes on income and social contributions (labour-related) (% GDP) x GDP (EUR million) | C) [Taxes on income and social 
contributions (labour-related) (EUR million) * 100] / [GVA (EUR million)]. 

Source: Authors’ calculations based on data from Franic et al. (2022), European Commission (2021), and Eurostat. 

61 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Table 7.  Government revenue lost due to undeclared work, EU-27, 2019 

Undeclared 
work (LIM 
estimates)2) 

GVA3) 

Country1) 

Taxes on income and 
social contributions 
(labour-related)4) 

Gov revenue lost due 
to undeclared work A)  GDP5) 

Gov spending (total) 
as % of GDP6) 

Estimated gov 
revenue lost as % 
of total spending B) 

(% GVA) 

(EUR million) 

(% GVA) 

(EUR million) 

(EUR million) 

Total EU-27 

14.8 

12 533 706 

Belgium 

14.0 

426 900 

Bulgaria 

23.8 

53 151 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

9.6 

9.3 

8.6 

16.4 

11.1 

18.8 

16.5 

13.6 

13.5 

20.4 

10.6 

14.9 

203 808 

270 438 

3 130 661 

24 088 

335 300 

158 762 

1 128 481 

2 169 269 

45 754 

1 611 354 

20 160 

26 692 

Lithuania 

26.0 

43 901 

22.9 

24.9 

13.8 

21.1 

21.6 

25.0 

18.7 

10.8 

18.2 

19.5 

26.0 

17.5 

24.0 

16.5 

17.2 

16.1 

425 279 

14 861 

1 743 

4 136 

5428 

14 017 091 

478 161 

61 558 

225 569 

310 476 

67 209 

3 473 350 

27 732 

356 526 

183 250 

1 244 375 

2 437 635 

55 571 

1 796 634 

23 010 

30 647 

48 860 

737 

4 037 

5 443 

36 342 

76 581 

1 080 

78 800 

354 

685 

1 842 

62 

(%) 

46.5 

51.8 

35.5 

41.1 

49.5 

45.0 

39.4 

24.2 

47.9 

42.1 

55.4 

46.0 

48.5 

38.4 

38.2 

34.8 

(%) 

6.5 

6.0 

8.0 

4.5 

3.5 

4.3 

6.7 

4.7 

6.2 

6.9 

5.7 

4.2 

9.0 

4.0 

5.9 

10.8 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Luxembourg 

7.0 

56 923 

Hungary 

20.1 

123 671 

Malta 

23.4 

12 546 

Netherlands 

12.8 

724 960 

Austria 

5.3 

355 291 

Poland 

19.7 

469 114 

Portugal 

12.0 

185 536 

Romania 

27.1 

201 790 

Slovenia 

13.0 

42 329 

Slovakia 

14.5 

84 047 

Finland 

Sweden 

Notes:  

9.9 

7.5 

207 285 

423 512 

1) Countries listed in EU protocol order – Eurostat. 

18.1 

20.3 

12.8 

20.6 

27.0 

20.1 

16.1 

13.4 

22.4 

18.0 

22.8 

25.6 

720 

5 051 

375 

19 149 

5 078 

18 606 

3 576 

7 318 

1 233 

2 196 

4 678 

8 119 

62 704 

146 113 

14 042 

813 055 

397 519 

533 600 

214 375 

223 163 

48 397 

94 048 

239 852 

476 870 

42.9 

45.7 

36.0 

42.0 

48.6 

41.8 

42.5 

36.3 

43.3 

40.7 

53.3 

49.1 

2.7 

7.6 

7.4 

5.6 

2.6 

8.3 

3.9 

9.0 

5.9 

5.7 

3.7 

3.5 

2)  Franic, J., Horodnic, I.A. and Williams, C.C., Extent of undeclared work in the European Union, European Labour Authority, European Platform tackling undeclared work, 2022. 

3) GVA (current prices, EUR million) | Details | Eurostat – GVA data, extracted June 2022 |; 4) Taxes on income and social contributions (labour-related).. 

5) GDP at market prices (current prices, EUR million) | Details | Eurostat – GDP (market prices) data, extracted June 2022 |. 

6) General government expenditure by function (Classification of the Functions of Government – COFOG) – total, public order and safety, environmental protection, health, education | Details | Eurostat – general 
government expenditure data, extracted June 2022 |. 

A) Undeclared work (LIM estimates) (% GVA) x GVA (EUR million) x taxes on income and social contributions (labour-related) (% GVA) | B) [Gov revenue lost due to undeclared work (EUR million) * 100] / [Gov 
spending, total (% of GDP) x GDP (EUR million)]. 

Source: Authors’ calculations based on data from Franic et al. (2022), European Commission (2021), and Eurostat. 

63 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Little or no information exists on the damage of each form of undeclared work. However, 
taking  together  the  few  studies  that  analyse  the  various  forms  of  undeclared  work  can 
yield some insights. Putninš and Sauka (2015) concluded that for Baltic countries, of the 
three  main  components  of  the  undeclared  economy  (unreported  income  by  businesses, 
unregistered employment, under-registered employment), under-registered employment is 
the  largest,  accounting  for  39%  -  52%  of  the  total  undeclared  economy  for  those 
countries.  

Under-reported  employment  was  also  found  to  be  more  prevalent  than  other  forms  of 
undeclared  work  in  a  more  recent  study  (Horodnic  and  Horodnic,  2022)  on  the 
construction  industry  in  Romania.  Workers  were  asked  to  select  all  working  situations 
applicable  to  them  from  a  list  of  fully  formal  work  and  nine  types  of  undeclared  work 
(covering  various  types  of  under-reporting  employment,  as  well  as  unregistered 
employment  and  undeclared  self-employment).  The  results  showed  that  13%  of  the 
workers received one or more forms of envelope wages (i.e., 5% received a monthly fixed 
cash  supplement  to  the  fixed  official  declared  wage;  3%  received  a  varying  cash 
supplement to the fixed official declared wage, in line with professional achievements (i.e. 
speed/quality  of  work);  4%  received  a  varying  cash  supplement  to  the  fixed  official 
declared wage based on hours worked; and 1% received an occasional undeclared cash 
payment,  such  as  holiday  allowances,  13th  month  wage,  bonuses).  In  addition,  4%  of 
workers,  although  having  fully  declared  the  income  with  their  employer,  carried  out 
undeclared  paid  activities  on  their  own  account  in  their  free  time.  Thus,  17%  of  the 
workers  under-reported  their  real  income.  Only  1%  worked  for  an  employer  and  were 
entirely  undeclared  (without  an  employment  contract),  while  1%  worked  entirely 
undeclared on their own, i.e., without having any legal form of registered self-employment 
(Horodnic and Horodnic, 2022).  

These  findings  suggest  that  while  under-reported  employment  hides  only  a  share  of  the 
worker wage, in fact it represents a higher share of the total of undeclared work, as it is far 
more frequent and difficult to detect.  

An  EU-level  study  concluded  that  the  main  component  of  undeclared  work  is  work  that 
takes  place  in  the  context  of  an  employment  relationship  (62.9%),  compared  to  36.3% 
accounted  for  by  self-employment,  and  0.8%  by  family  work  (Franic  et  al.,  2022). 
However, the study does not differentiate the various forms of undeclared work carried out 
under  an  employment  relationship,  such  as  unregistered  employment  or  under-declared 
employment.  Nevertheless,  using  Franic  et  al.’s  estimates  on  the  structure  of  the 
undeclared labour market across the EU, the estimated damage provided in Figure 5 can 
be split by type of employment. Thus, at EU-27 level, of the 6.5% of the total tax revenue 
lost due to undeclared work, 4.1% was caused by undeclared work carried out within an 
employment  relationship,  2.4%  by  self-employed  persons,  and  only  0.1%  by  undeclared 
work of family work (see Figure 4). However, large cross-country variations exist. In some 
countries  the  majority  of  the  damage  is  caused  by  undeclared  work  among  the  self-
employed  (e.g.,  the  Netherlands  Malta,  Ireland,  Cyprus),  while  the  damage  in  other 
Member States stems primarily from undeclared work within an employment relationship 
(e.g., Lithuania, Italy, Poland, Bulgaria, Romania, Belgium, Hungary, Slovenia, Slovakia). 

This approach – estimating the damage of the shadow economy and undeclared work – 
has  certain  limitations.  Firstly,  there  are  limits  to  estimating  the  size  of  both  the  shadow 
economy  and  undeclared  work,  including  the  lack  of  data  preventing  an  analysis  of 
damage by different types of undeclared work. Secondly, there are limitations in trying to 
understand the true nature of the damage caused, as this approach looks solely at the tax 
revenue  lost  and  excludes  other  aspects  of  the  damage  for  governments  and  societies 
(e.g.,  lack  of  worker  protection).  Finally,  different  Member  States  have  different  tax  and 
social  security  systems,  making  it  difficult  to  compare  the  damage  across  countries. 
Nevertheless, it allows an estimate of the damage in terms of public goods and services 
foregone as a result of the shadow economy and undeclared work. 

64 

 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK 

Figure 4.  Estimated government revenue lost as % of total government spending, EU-

27, by type of employment, 2019 

Total EU-27

Belgium

Bulgaria

Czech Republic

Denmark

Germany

Estonia

Ireland

Greece

Spain

France

Croatia

Italy

Cyprus

Latvia

Lithuania

Luxembourg

Hungary

Malta

Netherlands

Austria

Poland

Portugal

Romania

Slovenia

Slovakia

Finland

Sweden

6.5

6.0

8.0

4.5

3.5

4.3

6.7

4.7

6.2

6.9

5.7

4.2

9.0

4.0

5.9

10.8

2.7

7.6

7.4

5.6

2.6

8.3

3.9

9.0

5.9

5.7

3.7

3.5

2.4

0.4

0.6

0.8

2.2

2.0

2.9

3.4

2.1

3.2

3.0

0.8

0.8

3.3

1.9

1.9

1.1

1.4

4.0

5.0

0.6

0.4

1.8

1.7

0.6

1.3

2.5

1.3

8.2

8.9

4.1

5.6

7.4

3.7

1.3

2.3

3.8

1.3

3.9

3.6

2.6

3.4

0.5

4.0

1.4

6.2

3.4

0.5

2.0

7.9

2.1

7.3

5.3

4.4

1.2

2.2

0.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.2

0.1

0.1

0.0

0.0

0.2

0.0

0.0

0.2

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

TOTAL

Self-employed

Employment relationship

Family workers

Notes: Countries listed in EU protocol order– Eurostat; Data on the structure of the undeclared labour market across the EU (by type of 
employment) was extracted from Franic et al. (2022). 

Source: Authors’ calculations based on data from Franic et al. (2022). 

Key takeaways 

The damage of the shadow economy and/or undeclared work can only be estimated in 
terms of lost government revenue. For the shadow economy this represents 13.9% of 
total government spending for the EU-27 (based on 2017 data). For undeclared work 
this represents 6.5% of total government spending (based on 2019 data), out of which 
about two thirds or 4.1% is related to under-declared employment. 

65 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

4  Synthesis of types of policies implemented by 

Member States and their effectiveness in tackling 
undeclared work 

This  section  presents the  nature  and  pattern  of  policy  recommendations  in  the  literature 
and  provides  some  more  detailed  insights  on  policy  effectiveness  based  on  the  existing 
evidence. Limited evidence is available on some areas of policy to tackle undeclared work 
in  EU  Member  States  including,  for  example,  on  the  holistic  approach  as  well  as  on  the 
effectiveness of combining and sequencing multiple policy measures. 

logic, 

follows  a  similar 

This  study 
implementing  a  meta-evaluation  of  policy 
recommendations45  provided  in  research  that  reviewed  interventions  tackling  undeclared 
work,  tax  evasion  or  shadow  economy  more  broadly  with  a  view  to  analysing  and 
detecting  effective  policy  combinations.  In  addition,  socio-economic  characteristics  of 
different  regional  groupings  are  used  as  a  point  of  comparison  where  recommendations 
are  linked  to  a  specific  region/country  to  cross-  check  effectiveness  and  fit  of  the 
recommendations.  

Figure 5.  Structure of a typical paper on undeclared work 

Source(s): ICF, Cambridge Econometrics analysis.  

Five types of policy interventions available to governments to tackle undeclared work are 
presented  below  inspired  by  the  Jessen  and  Kluven  (2021)  framework.46  These  include 
enforcement, financial, informational, administrative, and regulatory interventions: 

1.  Enforcement  interventions  aim  to  increase  compliance  with  the  law,  rules  or 
obligations  through  compelling  actions  or  observance.  Examples  include  labour 
inspections,  tax  audits,  sanctions,  and  increasing  the  perceived  probability  of 
detection, such as through reminder letters or data analytics;  

2.  Financial interventions reduce the monetary costs of (transitioning into) declared 
work,  including  interventions  that  lower  the  tax  burden  and  social  security 
contributions  or  reimburse  registration  fees.  Monetary  compliance  rewards  fall 
under  the  category,  as  does  subsidising  the  development  of  small  and  medium-

45 It means a meta evaluation of the quality of policy recommendations and their effectiveness for undeclared work/ shadow 
economy or tax evasion. It uses a set of multiple studies and their corresponding dataset coding insights of geographical 
scope,  outcome  measures,  type  of  policy  intervention  used  and  recommendation  made  to  gather  deeper  insights  into 
policy combinations and their effectiveness. 

46 The final typology of policy intervention applied in the study database does not map perfectly onto the categorisation by 
Jessen and Kluven (2020). The study team slightly modified the set of codes after working through the initial review of the 
literature.  The  key  difference  is  that  this  typology  a)  combines  Jessen  and  Kluven’s  (2020)  categories  of  ‘financial 
incentives’  with  ‘tax  incentives  and  social  security  reductions’;  and  b)  adds  a  category  of  ‘regulatory  and  legal 
interventions’ to capture otherwise unclassifiable literature sources.  

66 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

sized enterprises (SMEs), different fiscal reforms related to the size and distribution 
of  the  tax  burden,  and  public  spending.  The  majority  of  the  publications  identified 
under  this  typology  include  an  analysis  of  the  effect  of  (marginal)  tax  rates  on 
undeclared  work  (e.g.  Annicchiarico  and  Cesaroni,  201647;  Cuccarine,  Giuli  and 
Marchetti, 201448; Feld and Larsen, 201249; Kleven et al., 201150; Kuehn, 200751);  

3.  Information  interventions  aim  to  convey  knowledge  of  processes  and  highlight 
the  benefits  of  achieving  the  objective  of  the  undeclared  work  policy  (e.g., 
increased quality of public services if paying taxes). The policy type encompasses 
a wide range of measures. Several studies in the database analysed the effect of 
taxpayer  communications,  including  simplifications,  normative  appeals,  and/or 
offers  of  assistance  (e.g.,  De  Neve  et  al.,  201952;  Hasseldine  et  al.,  200753). 
Another  cluster  of  publications  investigated  tax  morale  as  a  measure  of  trust  in 
formal institutions54 and  horizontal trust in fellow citizens55 (e.g., Williams  and Öz-
Yalaman, 202156). Other examples of policy measures are shaming penalties, peer 
comparisons,  public  disclosure  of  tax  information,  design  of  tax  return  forms,  and 
communication form (e.g., posted vs handed-out tax notification letters).  

4.  Administrative  interventions  aim  to  enable  compliance  by  improving  the 
management  of  public  affairs.  This  type  includes  policy  measures  that  aim  to 
process  a  socio-cultural  shift  in  how  stakeholders  approach  tackling  undeclared 
work,  voluntary  disclosure  initiatives,  increasing  the  take-up  of  tax  benefits, 
collaborating with third-party organisations including social partners, charities, and 
credit  card  companies,  as  well  as  simplification  measures  that  aim  to  reduce  the 
financial and mental burden of declaring taxes by adopting a data-driven approach 
to tax return forms and payment systems (e.g., Bankman, 200857).  

5.  Regulatory  interventions  focus  on  changes  in  the  legal  framework  to  address 
wider  socioeconomic  factors  that  may  (unintentionally)  sustain  undeclared  work. 
Examples  include  altering  minimum  wages,  minimum  income,  the  quality  and 
consistency  of  employment  (protection)  regulation,  international  reforms  and 
agreements  on  international  taxation,  creating  new  supervisory  political  units, 
improving  political  representation  and 
control  within  subcontracting  chains, 

47  Annicchiarico,  B.  and  Cesaroni,  C.  ‘Tax  reforms  and  the  underground  economy:  a  simulation-based  analysis’,  CEIS 
Working Paper No. 366, 2016, available at: https://ssrn.com/abstract=2729963 or http://dx.doi.org/10.2139/ssrn.2729963  
48  Ciccarone,  G.,  Giuli,  F.  and  Marchetti,  E.,  ‘Tackling  undeclared  work.  Suggestions  from  a  business  cycle  model  with 

search frictions’, Economia Politica, Vol. 31, No 2, 2014, pp.125-148. 

49 Feld, L. P. and Larsen, C., ‘Self-perceptions, government policies and tax compliance in Germany’, International Tax and 

Public Finance, Vol. 19, No 1, 2012, pp. 78-103. 

50 Kleven, H.J., Knudsen, M.B., Kreiner, C.T., Pedersen, S. and Saez, E., ‘Unwilling or unable to cheat? evidence from a tax 
audit experiment in Denmark’, Econometrica, Vol. 79, 2011, pp. 651-692, available at: https://doi.org/10.3982/ECTA9113  

51 Kuehn, Z., Tax rates, governance, and the informal economy in high-income countries, 2007. 
52  De  Neve,  J.-E.,  Imbert,  C.,  Spinnewijn, J.,  Tsankova,  T.  and  Luts, M.,  ‘How  to  improve  tax  compliance?  evidence  from 
at: 
SSRN 

Electronic 

Belgium’, 

available 

Journal, 

2019, 

in 

population-wide 
https://doi.org/10.2139/ssrn.3389405  

experiments 

53 Hasseldine, J., Hite, P., James, S. and Toumi, M., ‘Persuasive communications: Tax compliance enforcement strategies 
for  sole  proprietors’,  Contemporary  Accounting  Research,  Vol.  24,  No  1,  2007,  pp.  171–194,  available  at: 
https://doi.org/10.1506/P207-004L-4205-7NX0  

54 ‘Participants were asked to rate the acceptability of five types of undeclared work using a 10-point Likert scale (where 1 
means  absolutely  unacceptable  and  10  means  absolutely  acceptable).  […  for  example,]:  an  individual  is  hired  by  a 
household and does  not  declare the payment  received to the tax or social security  authorities  even  though  it should be 
declared;  […]  a  firm  hires  an  individual  and  all  or  a  part  of  the  wages  paid  to  them  are  not  officially  declared,  […]’ 
(Williams and Öz-Yalaman, 2021, p. 410). 

55  ‘Do  you  personally  know  any  people  who  work  without  declaring  their  income  or  part  of  their  income  to  tax  or  social 

security institutions?’ (Williams and Öz-Yalaman, 2021, p. 411). 

56 Williams, C.C. and Öz-Yalaman, G., ‘Re-theorising participation in undeclared work in the European Union: lessons from 

a 2019 Eurobarometer survey’, European Societies, 2021, pp. 1–25. 

57 Review of two technological-based pilot programmes in  California, where,  among others, the government  provided  pro-
forma or tentative tax returns to taxpayers (Bankman, J., ‘Using technology to simplify individual tax filing’, National Tax 
Journal, Vol. 61, No 4 Part 2, 2008, pp. 773-789). 

67 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

governance quality, as well as realigning the overall tax system (enforcement rules, 
remittance rules, determining the tax base and tax rate) (Slemrod, 201658).  

Before presenting the outcomes of the analysis a number of limitations should be kept in 
mind:  

  Few studies analysed the long-term effects of the policy intervention in question for 
more  than  a  year  and  those  that  did  so  tended  to  use  quasi-experimental  or 
statistical association research designs;59  

  Qualitative  methods,  simulation  models,  laboratory  experiments,  and  systematic 
reviews  were  less  well-represented.  There  was  a  lack  of  research  at  company 
rather than individual level. Studies were more likely to analyse specific groups of 
individuals,  such  as  taxpayers,  students,  or  workers,  often  with  no  explicit 
distinction between employed and self-employed workers;  

  Publications  seldom  acknowledged  the  role  of  different  industries  or  sought  to 
cover all industries. The level of analysis was often (cross-) national rather than at 
local or regional level.  

This may usefully point  to areas of future research, whether to bolster promising lines of 
enquiry or fill evidence gaps.  

4.1 

Distributions of key variables 

The  following  section  presents  an  overview  quantifying  the  variables  (recommendations, 
type  of  policy  intervention,  outcome  measures,  geographic  region)  extracted  from  the 
literature on policy measures. Figure 6 summarises these variables.  

Figure 6.  Distribution of observations by different variables 

58 Slemrod, J., ‘Tax compliance and enforcement New research and its policy implications’, SSRN 2726077, 2016. 
59 In addition to the time horizon of the intervention assessed, the study team tracked the time period of the data considered 
in  the  analysis.  The  starting  years  of  analysis  ranged  from  1930-2020  (with  most  publications  starting  somewhere 
between 2007 and 2016). The end years of analysis ranged from 2000 to 2020 (with most publications considering up to 
a  year  between  2013  and  2016).  Few  papers  used  10+  years  of  data  (eight  publications)  –  these  include  literature 
reviews, calibration  models build on large  amounts of past data, statistical  correlation  analysis  with administrative data, 
and some quasi-experimental  designs  (e.g. to investigate  the  parallel trends  assumptions for  a difference-in-differences 
research design).  

68 

 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Note: The  regional group  Central  and Eastern Europe,  Southern  Europe  includes  Bulgaria, Croatia,  Cyprus, 
Greece, Romania, Slovenia. 

Source(s): ICF, Cambridge Econometrics analysis. 

The  observations  represent  unique  paper-variable  such  as  recommendations,  regions 
pairs60. The top-left panel shows 79 unique paper-recommendation combinations:61 

  25%  of  which  fall  under  the  broad  category  of  Provide  information,  followed  by 

Tackle determinants of undeclared work (15%);  

  Categories  such  as  Enhance  risk  of  detection,  Improve  public  service  delivery, 
Modernise  formal  institutions,  Adopt  a  holistic  approach,  and  Introduce  non-
financial  incentives  have  lower,  but  similar,  shares,  at  around  10%  (eight/nine 
instances apiece); 

  Other  interventions  are  far  less  common,  such  as  Introduce  financial  incentives 

(three occurrences) and Enhance deterrence: general (one occurrence).  

The  recommendations  provided  by  the  literature  span  a  wide  array  of  policies,  with  a 
preference  for  providing  more  information  on  undeclared  work  and  raising  public 
awareness.  Some of these recommendations naturally follow the type of intervention the 
research paper focuses on – for example, if a piece of research focused on the success of 
information  campaigns,  then  it  would  typically  recommend  continuing  information 
campaigns.  Given  the  theoretical  movement  towards  a  holistic  approach,  such  a 
recommendation  occurred  frequently,  recognising  the  need  to  consider  both  formal  and 
informal  institutions  in  efforts  to  transform  undeclared  work  into  declared  work.  Such 
recommendations  to  provide  information  often  focussed  on  the  need  for  information 
campaigns to  help  demystify tax  collection  processes,  to  help  communicate the  purpose 
and use  of tax payments and focussing on the social and local benefits of paying taxes. 
The  conclusions  of  the  papers  often  lacked  specificity,  but  nevertheless  identified  and 
recognised that a suite of interventions (range of measures, variety of actors) is required 
for  longer-term,  and  wider  spanning  success.  It  should  be  noted  however  that  no  single 
research  paper  was  identified  that  provided  for  a  comparative  assessment  of  different 
policy instruments. 

60 By pairs we mean that we take out an overview of the individual categories considered in the analysis (how is undeclared 
work defined and measured, which policy interventions are studied, which regional groups were included in the analysis/ 
affected).  We  then  analyse  each  variable  in  combination  with  policy  recommendations  to  shed  light  on  ways  to  tackle 
undeclared  work,  thus  answering  the  questions  –  what  policies  were  recommended  for  the  defined  type  of  undeclared 
work; were certain interventions identified as more effective; were these recommendations valid for all geographic regions 
or only some. 

61 Papers that did not propose any recommendations were excluded. 

69 

 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

The  top-right  panel  (Figure  6)  shows  the  measure  of  undeclared  work  considered  in 
the  various  papers.  More  than  half  of  the  observations  fall  under  Tax  declaration  or 
Tax  revenue,  highlighting  the  emphasis  on  tax  compliance.  A  high  share  of  the 
interventions  considered  and  policies  recommended  are  thus  in  the  context  of  closing 
gaps  in  the  tax  take.  After  tax  compliance,  28%  of  the  observations  related  to  the 
workers’  side  of  undeclared  work  (Participation  in  undeclared  work),  with  just  two 
papers  considering  the  companies  (Demand  for  undeclared  work).  Recommendations 
proposed were therefore more likely to consider how to better engage workers to switch to 
declared  work,  rather  than  how  to  increase  companies’  demand  for  declared  work.  The 
literature has little to say about that demand, precluding any robust conclusions. 

The  bottom-left  panel  in  Figure  6  shows  the  policy  interventions  covered  by  the 
literature.  With  a  share  of  38%,  Enforcement/labour  inspections  is  by  far  the  most 
studied  policy  intervention,  highlighting  the  high  degree  of  attention  paid  to  direct 
control  policies,  as  the  traditional  tool  used  by  governments.  However,  Improve 
information accounts for 28% of interventions, pointing to a reasonable level of interest 
in  indirect  control  policies.  Other  interventions  (Regulation/laws,  Administrative,  and 
Financial  incentives)  have  lower,  but  far  from  negligible  shares,  with  around  10 
instances observed for each. The recommendations that followed from these last three 
classes  of  intervention  were  quite  mixed  (see  Section  4.1.3)  Whether  larger  group  sizes 
would inform firmer conclusions (or continued support for a mix of approaches) cannot be 
determined from the data collected. 

The bottom-right panel (Figure 6) shows the regions covered. Each paper focused on one 
or  more  countries,  which  were  grouped  into  different  regions  for  the  purposes  of  this 
analysis.  The  regional  groups  follow  the  EuroVoc  classification.62  It  shows  Western 
Europe,  Central  and  Eastern  Europe,  and  Non-European  as  the  most-studied  regions, 
followed  by  the  EU  (as  a  whole),  and  Global.  Few  of  the  papers  identified  studied 
Northern  Europe  and  Southern  Europe,  and  only  one  paper  studied  countries  in  both 
Central  and  Eastern  Europe  and  Southern  Europe.63  Interestingly,  just  two  of  the  four 
European regions were studied by a significant share of the literature reviewed:  Western 
Europe, and Central and Eastern Europe. The absence of studies devoted specifically to 
Southern  Europe  is  perhaps  most  notable,  suggesting  that  the  study  of  countries  within 
Northern  and  Southern  Europe  may  represent  a  fruitful  avenue  for  future  research  to  fill 
evidence  gaps.  On  the  basis  of  the  dataset  here,  little  can  be  concluded  about  policy 
needs  in  these  two  regions.  Table  8  shows  the  categorisation  of  countries  into  the  four 
regional groups.64 

Table 8.  Countries studied and regional group membership 

Central and Eastern 
Europe 

Northern Europe 

Southern Europe 

Western Europe 

Denmark 

Norway 

Bulgaria 

Croatia 

Czechia 

Hungary 

Montenegro 

Cyprus 

Greece 

Italy 

Spain 

Turkey 

Austria 

Belgium 

France 

Germany  

Netherlands 

62 See https://eur-lex.europa.eu/browse/eurovoc.html?params=72%2C7216 
63 Bulgaria, Croatia, Cyprus, Greece, Romania, Slovenia. 
64  The  study  considered  an  alternative  regional  classification  based  on  types  of  welfare  system  but  this  did  not  yield 

additional insights and was excluded from the analysis.   

70 

 
 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

North Macedonia 

Portugal 

Switzerland 

Poland 

Romania 

Serbia 

Slovakia 

Slovenia 

UK 

Source(s): ICF, Cambridge Econometrics analysis based on EuroVoc classification. 

Key takeaways 

Regarding  types  of  interventions,  the  largest  share  of  research  papers  focus  on 
information-related 
enforcement  (38%),  closely 
measures, including the appeal to social norms (27%).  

followed  by  communication  and 

The  top  three  recommendations  were:  provide  information,  tackle  the  underlying 
determinants  of  undeclared  work,  and  enhance  the  risk  of  detection.  There  is  a  data 
gap on comparative assessment of policy instruments and their implementation.  

4.2 

Cross-analysis and associated recommendations 

This  section  considers  pairs  of  variables  to  examine  whether  patterns  emerge  from 
combinations of policy features,  e.g., whether certain recommendations were more likely 
to  be  put  forward  in  certain  regions,  or  if  common  types  of  recommendations  followed 
from analyses of different policy interventions. It treats recommendations as observations, 
and other variables as characteristics and/or broader features of those observations. 

4.2.1 Outcome measures 

The  main  metrics  of  undeclared  work  analysed  in  the  literature  were  Participation  in 
undeclared  work,  Tax  declaration,  and  Tax  revenue  (see  Error!  Reference  source  not 
found.).  This  section  focuses  on  these  metrics  (as  synonym  to  describe  more  broadly 
undeclared  work  as  academic  literature  is  very  limited  focusing  on  undeclared  work  and 
its sub-types only) and the associated recommendations. 

To reduce Participation in undeclared work, the literature recommends a diverse set of 
policies, without clear support for a single measure. This confirms research on drivers 
(see  Section  2.2.)  and  the  multifaceted  nature  of  Participation  in  undeclared  work  as  a 
phenomenon.  This  also  confirms  the  need  to  tackle  the  issue  from  different  angles 
through a holistic approach.  

When  undeclared  work  is  measured  by  the  degree  of  Tax  declaration,65  the  literature 
was  divided,  with  some  papers  suggesting  a  more  direct  approach  (raising  the  risk  of 
detection)  and  a  more  indirect  approach  (providing  more  information  and  improving 
communication).  One  possible  interpretation  is  an  underlying  disagreement  about  the 
most  effective  solution  but,  equally,  such  a  split  could  support  the  idea  that  tackling 

65 Tax declaration often focused on individuals’ self-assessment tax returns.  

71 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

undeclared  work  (as  measured  by  Tax  declaration)  may  require  a  combination  of 
approaches.66 

For  undeclared  work  measured  in  Tax  revenue,  the  literature  clearly  favours 
interventions  that  improve  the  availability  of information  and knowledge,  preferring 
indirect interventions rather than direct enforcement. 

Key takeaways 

The analysis corroborates the idea that indirect policies such as Provide information are 
useful to address different types of motivations to Participate in undeclared work. On the 
other hand, more direct tools such as Enhance risk of detection are seen as more suited 
to addressing undeclared work measured by Tax declaration.  

4.2.2 Interventions 

To  understand  if  interventions  were  effective,  the  relationship  between  the  intervention 
examined,  and  the  recommendations  (of  the  research  paper)  has  been  analysed. 
Interventions  (i.e.,  Administration  Enforcement,  Provide  Information,  etc.)  that  were  the 
subject  of  this  research  report  were  chosen  on  the  basis  that  they  were  effective 
measures albeit the research conducted of the paper may find out otherwise.67 Again, the 
potential  for  publication  bias  should  be  borne  in  mind,  as  the  literature  may  show  a 
tendency to study what researchers already believe to be effective. 

Figure  7  shows  the  distribution  of  recommendations,  grouped  by  policy  intervention 
examined, in both numbers and percentages. The interventions most frequently analysed 
fell  under  the  categories  of  Enforcement  and  Improve  information,  with  some  attention 
given  to  others.  For  Enforcement  interventions,  around  25%  of  the  subsequent 
recommendations suggested Provide information and another 25% to Enhance the risk of 
detection. The recommendations suggests that alternative or supplementary measures to 
increasing  Enforcement  should  be  implemented,  particularly  via  provision  of  more 
information and improving knowledge as well as via increasing Enforcement by raising the 
risk of detection. The remaining recommendations spanned a mix of categories, with little 
indication of any strong preference.  

66 This includes the idea that enforcement ensures the bulk of compliance but further measures are needed to address the 
residual non-compliance or that communication and behavioural interventions enable enforcement to have its full effect. 
67 As such, recommendations are highly contextual and can differ from a paper’s conclusion of the overall effectiveness of a 
policy  intervention  (this  applies  especially  in  quantitative  assessments  and  papers  arguing  for  saturation  effects  to 
enforcement). 

72 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Figure 7. 

 Distribution of recommendations by policy interventions, numbers (upper 
panel) and percentages (lower panel) 

Source(s): ICF, Cambridge Econometrics analysis. 

While examination of enforcement-oriented interventions does not clearly lend support for 
direct  tools/  actions,  views  on  actions  to  Improve  information  (the  other  major  type  of 
intervention  considered)  were  more  positive.  Here,  the  data  show  an  overwhelming 
majority  of  recommendations  in  support  of  providing  more  information  and  knowledge. 
Interventions  aimed  at  improving  information  were  deemed  effective,  with  some 
consensus on the positive role of information-related actions.  

The robustness of other findings was reduced by the small numbers of papers in the other 
categories.  Nevertheless,  when  analysing  Regulation/laws  interventions  (for  which  the 
data list 11 recommendations), the literature proposes Tackle determinants of undeclared 
work,  possibly  hinting  at  the  need  for  new  regulations  to  tackle  systemic  factors. 
However,  such  regulations  need  to  be  carefully  balanced  so  as  to  avoid  overregulation 
that might inadvertently increase participation in undeclared work, as seen in Italy (Vallanti 
and Gianfreda, 2020). There were three calls to Modernise formal institutions, suggesting 
the  inadequacy  of  current  legal  frameworks  and  the  possible  need  to  close  regulatory 
gaps  (e.g., Wagner  and Berntsen (2016) described  the  establishment  of  chain  liability in 
contracting processes in the construction sector in Germany). Other suggestions were to 
provide greater resourcing to tax enforcement agencies to increase internal capacity 
and  capability,  and,  where  appropriate,  to  centralise  tax  enforcement  activities.  The 
literature’s assessment of regulatory and legal interventions offers very little support (just 
one recommendation out of 11) for the direct approach in the form of greater detection. 

When  analysing  Administrative  interventions,  the  literature  suggests  that  public 
administration  should  improve  the  way  it  provides  services,  for  example,  by  putting  in 

73 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

place  information  and  tax  collection  systems  that  ease  compliance,  or  by  improving 
methods to examine tax returns. The literature may therefore be identifying weaknesses in 
the operation of public administration that need to be corrected. Introducing non-financial 
incentives  was  also  deemed  useful,  suggesting  less  need  for  direct  intervention  by  the 
state. Analyses of financial incentives do not clearly conclude that they are effective.  

Key takeaways 

The  literature  was  mixed  on  the  kind  of  recommendations  associated  with  research 
papers on enforcement interventions to improve (further) effectiveness of  Enforcement 
interventions.  A  similar  share  of  papers  recommend  a  focus  on  enhancing  risk  of 
detection  and  deterrence  measures  as  papers  preferring  to  focus  on  providing 
information (possibly to bolster existing enforcement measures). 

A frequent recommendation in regard to Administrative interventions was to improve the 
delivery of public services (e.g. access to public funds and support, delivery and quality 
of  public  administration)  for  Regulatory  interventions  to  tackle  systemic  factors 
(equipped enforcement authorities (resources in terms of staff), clarity of regulations) . 

4.2.3 Regions 

The  cross-analysis  of  regional  groups  and  recommendations  begins  by  examining 
differences  between  regional  groups  for  key  socioeconomic  variables.  Differences  in 
these  indicators  might  have  an  impact  on  the  recommendations  put  forward  by  the 
literature, either by calling for specific policy interventions or by qualifying the implications 
for those policy interventions. 

Table  9  shows  a  range of  socioeconomic  and  governance  indicators,  by  regional  group, 
over  the  period  2010-2019.  This  spans  the  period  between  the  financial  crisis  and  the 
COVID-19  pandemic.  The  period  was  chosen  because  it  is  comparatively  stable  when 
considering  structural  indicators  for  EU  Member  States,  as  well  as  matching  the 
publication  timeframe  of  much  of  the  literature.  The  choice  of  individual  indicators  was 
informed by a broad assessment of structural factors and data availability.68 

Unsurprisingly,  the  table  shows  a  clear  divide  in  Europe  with  respect  to  the  main 
macroeconomic  indicators.  Western  and  Northern  European  countries  have  significantly 
higher GDP per capita, almost double that of the other two regions. Employment rates are 
also  higher  in  Western  and  Northern  Europe  by  more  than  10  percentage  points  (p.p.) 
compared to their Central and Eastern or Southern European counterparts. A similar – if 
less pronounced – feature is evident on tax revenues as a share of GDP. While Southern 
Europe is somewhat closer to Northern and Western Europe, with tax revenue equivalent 
to  around  40%  of  GDP,  the  share  in  the  Central  and  Eastern  European  region  is 
noticeably lower at closer to 30%.  

The  employment  statistics  show  broadly  similar  patterns.  The  share  of  the  workforce 
earning the minimum wage, or close to it, is highest in Central and Eastern, and Southern 
Europe, and far lower in the more developed regions. The shares of self-employment are 
also  higher  in  Central  and  Eastern,  and  Southern  Europe,  with  this  form  of  employment 
less prevalent in Northern and Western Europe. The share  of migrant workers is highest 
in Southern and Western Europe, followed closely by Northern Europe; the average share 
in Central and Eastern Europe is much lower, at little more than 1%. 

Employment in the construction, agriculture, and accommodation sectors does not deviate 
from the general trends. These sectors are generally not associated with high salaries and 

68  Experts  confirmed  the  lack  of  a  widely  accepted  model  for  the  determinants  of  undeclared  work  but  accepted  the 

plausibility and rationale for the indicators selected. 

74 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

are  among  those  believed  to  be  most  susceptible  to  undeclared  work.  The  Central  and 
Eastern European region and Southern Europe have much higher shares of employment 
in these sectors (around 22%), than Northern and Western Europe (around 13%).  

The averages summarise 10 years of data into single numbers,  but the ranking of these 
regions remained relatively stable over the period (see Table 10), with few instances of a 
region  improving  its  relative  standing.  For  example,  Southern  Europe  was  overtaken  by 
Central  and  Eastern  Europe  in  the  rate  of  employment  and  by  Western  Europe  in  the 
share of migrant workers. Significant change was evident only in the construction sector, 
where Southern Europe went from having the highest share of employment in the sector 
to  having  the  lowest.  The  opposite  happened  in  Northern  Europe,  which  went  from  the 
lowest share to the second-highest share.  

The  governance  indicators  come  from  a  separate  source  (World  Bank’s  World 
Governance  Indicators)  and,  while  quantitative  in  nature,  rely  on  expert  judgement.  The 
patterns  are  almost  identical  to  those  observed  in  the  Eurostat  data.  Western  and 
Northern  Europe  are  considered  frontrunners  in  government  effectiveness,  regulatory 
quality, and control of corruption, respectively, while Southern Europe is third, with scores 
half (or less) than those of the previous two. Central and Eastern Europe lags behind on 
governance indicators, particularly control of corruption, for which it scores almost zero. 

Table 9.  Socioeconomic and governance characteristics of Eurovoc regional country 

groups, 2010-2019 averages 

Central and 
Eastern Europe 

Northern 
Europe 

Southern 
Europe 

Western 
Europe 

GDP  per  capita  PPP 

(EUR) 

Employment rate (%) 

Tax 

revenue 

as 

a 

percentage of GDP (%) 

Share of migrant workers 

in total employment (%) 

Share  of  minimum  wage 

earners* (%) 

Share  of  self-employed 

(%) 

Share  of  employment  in 

16 880 

60.1% 

33.5% 

1.1% 

6.5% 

16.1% 

40 500 

73.7% 

43.6% 

7.2% 

1.5% 

7.6% 

22 608 

58.2% 

37.0% 

34 940 

71.2% 

40.2% 

10.5% 

11.2% 

4.8% 

2.3% 

20.6% 

12.7% 

construction,  agriculture, 

22.0% 

12.4% 

22.7% 

13.6% 

and accommodation (%) 

Government 

effectiveness** 

Regulatory quality** 

Control of corruption** 
Note(s): 

0.44 

0.62 

0.13 

1.90 

1.70 

2.24 

0.73 

0.72 

0.45 

1.63 

1.56 

1.72 

Regional  country  groups  follow  the  definitions  in  Table  10,  only  covering  countries  listed  in 
Eurostat in each Eurovoc group.  
Figures are the arithmetic mean of the results for each country group to give an indication of how 
the  groups  compare.  Prior  inspection  of  the  ranges  of  results  by  country  suggests  the 
rankings/spread  of  results  is  adequately  reflected  in  the  above  (without  having  to  weight  by 
population). 
* Minimum wage share for 2017 only. 
** World Governance Index variables range from -2.5 to 2.5. 

Source(s): 

Eurostat (dark blue) and World Governance Indicators (light blue). 

75 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Table 10.  Rankings of socioeconomic and governance characteristics of regional country 

groups, 2010 and 2019 

Central and 
Eastern Europe 

Northern Europe  Southern Europe  Western Europe 

2010 

2019 

2010 

2019 

2010 

2019 

2010 

2019 

GDP per capita 

Employment rate 

Share of self-employed 

Share of migrant workers 

Tax revenue as a % of 
GDP 

Share of employment in 
construction 

Share of employment in 
accommodation 

Share of employment in 
agriculture 

Share of employment in 
construction+accommod
ation+agriculture 

Government 
effectiveness 

Regulatory quality 

Control of corruption 

5 

5 

2 

5 

5 

3 

4 

1 

2 

5 

5 

5 

5 

4 

2 

5 

5 

1 

3 

1 

2 

5 

5 

5 

2 

1 

5 

4 

1 

5 

5 

5 

5 

1 

1 

1 

2 

1 

5 

3 

1 

2 

5 

4 

5 

1 

1 

1 

4 

4 

1 

1 

4 

1 

1 

2 

1 

4 

4 

4 

4 

5 

1 

2 

4 

5 

1 

2 

1 

4 

4 

4 

2 

2 

4 

2 

3 

4 

3 

4 

4 

2 

2 

2 

2 

2 

4 

1 

3 

4 

4 

5 

4 

2 

2 

2 

Source(s): ICF, Cambridge Econometrics analysis based on Eurostat and World 
Governance Indicators data 

Notes: a rank of 1 represents the highest absolute value across regional county groups, a rank of 5 represents 
the lowest value. 

Figure 8 shows the distribution of recommendations by regional group, in both number of 
observations  and  percentages.  Northern  Europe  and  Southern  Europe  have  a  limited 
number of observations, necessitating a focus on comparisons between Western Europe 
and Central and Eastern Europe.  

In  both  regional  groups,  Provide  information  was  the  recommendation  most  often  put 
forward in the literature (41% of recommendations in Western Europe; 33% in Central and 
Eastern  Europe).  Provide  information  includes  recommendations  to  improve  citizens’ 
awareness  of  the  benefits  of  declared  work,  simplifying  the  communication  of  public 
administration, and fostering a culture of compliance. The similar frequency of these kinds 
of  recommendations  in  both  Western  Europe  and  Central  and  Eastern  Europe 
suggests 
in  different 
socioeconomic  contexts  (see  Figure  8Figure  8).  For  example,  Western  Europe  has 
much higher values for indicators of institutional quality such as government effectiveness, 
regulatory  quality,  and  control  of  corruption.  Even  regions/countries  with  well-functioning 

that  perceptions  and  culture  may  remain  relevant 

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EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

government  institutions  may  benefit  from  ensuring  that  citizens  are  engaged  and 
knowledgeable about the processes to and/or benefits of declared work. 

Central  and  Eastern  Europe  has  a  higher  share  of  recommendations  to  Tackle 
determinants  of  undeclared  work  (22%  in  Central  and  Eastern  Europe  vs  8%  in 
Western Europe). Significant differences exist between Western Europe and Central and 
Eastern Europe across several dimensions: Central and Eastern Europe has lower GDP 
per  capita,  lower  tax  revenues  as  a  share  of  GDP,  lower  employment  rates,  a  higher 
share  of  employment  in  construction,  agriculture,  and  accommodation,  lower  shares  of 
migrants  in  the  workforce,  a  higher  share  of  self-employed  and lower  institutional  quality 
(see  Table  9  above).  These  are  all  factors  that  can  be  linked  to  higher  levels  of 
undeclared  work  and,  by  highlighting  the  need  to  tackle  the  determinants  of  undeclared 
work,  the  literature  could  be  considered  to  emphasise  the  need  for  interventions  with  a 
wider/systemic scope in Central and Eastern Europe. The lower values of the indicators of 
institutional  quality  may  also  be  linked to  a  somewhat  higher  share  of  recommendations 
classified  as  Modernise  formal  institutions  in  Central  and  Eastern  Europe  compared  to 
Western Europe (16% and 8%, respectively). The literature appears to favour addressing 
systemic  factors  (institutional  and  economy-wide)  to  a  greater  degree  in  Central  and 
Eastern Europe.   

A number of papers concerned the EU as a whole, and the recommendations put forward 
focus  more  equally  on  both  regions  (Central  and  Eastern  Europe  and  Western  Europe). 
Recommendations  advocating  to  Introduce  non-financial  incentives  focussed  on  the 
value  of  preventative  efforts,  shifting  away  from  resolving  undeclared  work  after  it 
occurred. Such efforts included the possible cooperation between governments and social 
partners  to  undertake  appropriate  pilot  initiatives  focussed  on  preventing  participation  in 
UDW.  Other  examples  here  include  the  redesigning  of  tax-return  forms  to  better 
incentivise  completion rates.  Papers recommending to Improve public service delivery 
have  higher  shares  for  the  EU  as  a  group.  Interestingly,  Adopt  a  holistic  approach  is 
mentioned  at  a  similar  rate  for  the  EU  (  as  a  whole)  ,  Central  and  Eastern  Europe,  and 
Western Europe. Yet, a more detailed analysis for Southern and Northern Europe was not 
identified so far on this aspect.  

Comparing  the  EU  with  the  Non-European  group,  it  is  evident  that  the  two  groups  are 
quite  similar  in  the  composition  of  their  recommendations.  By  contrast,  Global69  had  a 
higher  share  of  Enhance  risk  of  detection,  although  this  is  likely  a  product  of  the 
approach,  as  the  Global  papers  often  supported  deterrence  involving  labour  inspections 
and tax audits.  

69 Global includes the US and groups of countries such as the OECD. 

77 

 
 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Figure 8.  Distribution of recommendations, by regional group, number (upper panel) and 

percentage (lower panel) 

Note: regional group Central and Eastern Europe, Southern Europe includes Bulgaria, Croatia, Cyprus, 
Greece, Romania, Slovenia. 

Source(s): ICF, Cambridge Econometrics analysis. 

Further  insight  into  the  linkages  between  policy  recommendations  and  the  broader 
socioeconomic  context  can  be  gained  by  comparing  the  regional  groups  with  the 
measures of undeclared work studied in the literature. This may reveal that certain forms 
of  non-declaration  (taxes  or  work)  are  more  prevalent  in  some  regional groups,  possibly 
depending on underlying socioeconomic conditions. There is a clear difference in the type 
of undeclared work analysed by regional group (see Figure 9). In Western Europe, 90% of 
observations  related  to  either  Tax  revenue  or  Tax  declaration,  whereas  in  Central  and 
Eastern  Europe  there  was  more  emphasis  on  Participation  in  undeclared  work  (60%  of 
observations). Differences in labour market indicators may explain these patterns: Central 
and Eastern Europe has lower employment rates, a higher share of workers on minimum 
wage,  and  higher  shares  of  workers  in  sectors  often  associated  with  informality  (i.e., 
construction,  agriculture,  accommodation).  Given  these  labour  market  conditions,  it  may 
be  reasonable  for  the  focus  in  Central  and  Eastern  Europe  to  be  more  oriented 
towards bringing workers into declared work.  

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EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Figure 9.  Distribution of outcome measures, by regional group, number (upper panel) 

and percentage (lower panel) 

Note: regional group Central and Eastern Europe, Southern Europe includes Bulgaria, Croatia, Cyprus, 
Greece, Romania, Slovenia. 

Source(s): ICF, Cambridge Econometrics analysis. 

In  Western  Europe  the  focus  was  more  on  increasing  tax  compliance,  possibly 
suggesting  the  presence  of  different  types  of  undeclared  work  (e.g.,  bogus  self-
employment, see Section 2.1). These findings augment the analysis of recommendations 
by regional group (see Figure 9). For example, the earlier analysis showed  that Provide 
information  was  a  common  recommendation  for  both  Central  and  Eastern  Europe 
and Western Europe. However, the content of that information could be different,  given 
the  measures  considered:  in  Central  and  Eastern  Europe  the  focus  related  more  to 
spreading  knowledge  about  the  benefits  of  declared  work,  while  in  Western  Europe  the 
context suggested improving the capability/willingness of citizens to correctly file their tax 
declarations. Similar reasoning may apply to the other policies recommended. 

Breakdowns  by  further  dimensions  were  possible  but  yielded  very  small  numbers  of 
observations, preventing any firm conclusions. Although these findings are not reported in 
detail,  the  breakdowns  nevertheless  suggest  that  efforts  to  reduce  participation  in 
undeclared work  in  Central  and  Eastern  Europe might  involve  a mix  of modernisation  of 
formal  institutions  and  the  provision  of  information.  Similarly,  the  dataset  casts  (at  least 
some)  doubt  on  the  effectiveness  of  enforcement/labour  inspection  interventions  in 
Central and Eastern Europe. 

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Key takeaways 

Regional groups show significant differences in broad socioeconomic indicators that 
could affect undeclared work and related policies, with Western Europe and Central and 
Eastern Europe being studied most so far.  

  Provide information was the most common recommendation in both regions.  

  Western Europe had a wider range of recommendations.  

  Central and Eastern Europe had a somewhat higher share of Modernise formal 
institutions and Tackle determinants of undeclared work, which may be linked to 
a lower performance in the chosen socioeconomic indicators.  

  Tax-compliance considerations were more prevalent in Western Europe,  

 

Issues related to Participation in undeclared work were more important in Central 
and Eastern Europe, suggesting different ways of implementing the policies 
recommended. 

4.3  When are interventions effective?  

Building on the preceding analyses, this section provides a more detailed account of when 
and  where  certain  interventions  demonstrated  effectiveness.  It  uses  the  typology  of 
interventions discussed in Section 4.1.2 to organise the discussion.  

4.3.1 Enforcement/labour inspections 

Enforcement  interventions  are  primarily  deployed  to  increase  levels  of  compliance  with 
legislative  requirements.  Across  the  research  papers  examined  for  this  study,  effective 
interventions  were  identified  at  national  and  local  level  in  the  Member  States  (Belgium, 
Germany,  Denmark,  Spain,  Slovenia),  the  UK,  and  the  US.  A  range  of  effective 
enforcement  interventions  were  identified,  particularly  when  attempting  to  improve  tax 
compliance.  

labour 

inspections)  demonstrated  some  effectiveness 

In  Belgium,  a  combination  of  enforcement  interventions  (including  financial  penalties 
in  tackling  tax  non-
and 
compliance  within  businesses.  A  greater  impact  was  demonstrated  when  such 
measures  were  implemented  in  conjunction  with  the  simplification  of  tax  payment 
systems  and  messages  to  help  taxpayers  to understand  tax  compliance  processes 
(De Neve et al., 2019).  

In Germany, deterrence measures such as fines, inspections, and imprisonment created 
the  perception  of  undeclared  work  as  high-risk,  with  such  interventions  shown  to 
negatively correlate with undeclared work (Feld and Larsen, 2012). In a case study on the 
payment  of  local  church  taxes  in  Bavaria,  the  announcement  of  audits  significantly 
reduced the likelihood of tax evasion. It also increased the likelihood of donations and 
tax  payment,  although  this  was  more  effective  for  individuals  who  were  partially  or 
fully evading taxes prior to the intervention (Dwenger et al., 2016).  

In  Denmark,  both  audits  and  the  perceived  threat  of  audit  were  effective  in 
increasing  tax  compliance  rates  on  all  forms  of  personal  income,  although  this  was 
more  effective  for  individuals  who  were  self-reporting  their  income  and  no  third-party 
information  was  available  (Kleven  et  al.,  2011).  This  further  suggests  the  importance  of 
third-party  reported  information  to  increasing  the  risk  of  detection  (e.g.,  employers, 
credit  card  companies).  Similarly,  in  the  UK,  audits  were  found  to  be  effective  and 
constituted  an  important  part  of  the  enforcement  strategy  in  tackling  tax  compliance 
(Hasseldine,  2007;  Advani  et  al.,  2015). 
among  self-reporting 

individuals 

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EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

Communications  that  noted  the  threat  of  an  audit,  the  threat  of  an  audit  with  penalties 
attached for any identification of non-compliance, and the identification of an individual as 
pre-selected  for  an  audit  all  demonstrated  effectiveness  in  increasing  tax  compliance 
among sole proprietors (Hasseldine, 2007). While somewhat costly,  when dealing with 
individuals  self-completing  tax  returns,  it  was  identified  that  communicating  to  such 
individuals that they had been pre-selected for an audit was significantly more effective in 
improving  compliance  rates  than  the  threat  of  an  audit  or  the  threat  of  an  audit  with 
penalties.   

In  Slovenia,  direct 
interventions  such  as  financial  penalties,  audits  and  the 
criminalising  of  unpaid  social  security  contributions  were  all  effective  in  increasing 
compliance rates (Lesnik et al., 2014). Spain imposed better monitoring of transactions 
and  required  companies  to  maintain  financial  paper  trails  to  tackle  the  evasion  of 
corporation  tax.  Both  measures  reduced  tax  evasion  across  sectors,  although  the 
effectiveness of monitoring differed according to the position of the company in the value 
chain.  Implementing  stringent  monitoring  procedures  proved  more  effective  where 
it  was  significantly  harder  for  companies  to  misreport  transaction  information, 
compared to companies selling directly to consumers and that had more opportunities to 
misreport  certain transactions  (Almunia  and  Lopez-Rodriguez, 2014).  Finally,  in  Norway, 
on-site  audits  examined  real-time  staff  registers  to  help  in  the  investigation  of  collusion 
and  tax  evasion  within  companies,  identifying  tax  evasion  particularly  in  smaller  firms 
(Bjørneby et al., 2018).  

Some  interventions  were  deemed  ineffective  in  tackling  varieties  of  undeclared  work. 
Contrary  to  the  findings  in  Germany,  in  Croatia  no  relationship  was  identified  between 
participation  in  undeclared  work  and  the  reported  perception  of  detection  and  level  of 
penalties that would be applied. Despite this, there was a clear correlation between higher 
participation  in  undeclared  work  and  lower  levels  of  tax  morale.70  As  such,  increasing 
enforcement  was  deemed  inefficient  unless  systemic  issues  were  identified  and 
addressed, namely the need to improve cultural elements,  buy in, and belief in systems 
of  taxation  (Williams  and  Franic,  2015).  A  similar  situation  was  identified  among  Polish 
citizens, with no association found between the perception of deterrence and engagement 
with undeclared work. Rather, tax morale was a key underlying factor in the demand and 
supply  of  undeclared  work.  In  Bulgaria,  enhanced  monitoring  and  auditing  of  newly 
established firms  was  deemed  counter-productive,  as  it  resulted in targeted  firms feeling 
unfairly watched and controlled, leading to a visible reduction in tax compliance (Gangl et 
al., 2014).   

Key takeaways 

Enforcement interventions demonstrate a level of effectiveness, especially audits and 
inspections. Yet, direct deterrence actions need to be carefully considered. Recommen-
dations point out that actions need to be used appropriately and not in a discriminatory 
way.  

A  failure  to  understand  the  context  of  an  intervention  can  have  the  unintended 
consequence  of  increasing  the  level  of  undeclared  work  or  tax  non-compliance  within 
the targeted sector. Many papers noted that enforcement activities alone are insufficient 
in  fully  tackling  undeclared  work.  Rather,  a  combination  with  informational  and 
motivational  interventions  is  needed  for  any  enforcement  strategy  to  be  considered 
optimal.  These  combinations  include  increasing  levels  of  public  awareness  around tax 
compliance  requirements  (Lesnik  et  al.,  2014),  a  combination  of  audit  and  penalty 

70  Tax  morale  aims  to  measure  the  symmetry  between  individual-  and  state  norms.  It  tends  to  be  measured  through 
attitudinal questions based on the Eurobarometer survey which rate the acceptability of various types of undeclared work 
on a 10 point scale. For example, see Colin C. Williams & Ioana A. Horodnic (2015) Explaining and tackling the shadow 
economy  in  Estonia,  Latvia  and  Lithuania:  a  tax  morale  approach,  Baltic  Journal  of  Economics,  15:2,  81-98,  DOI: 
10.1080/1406099X.2015.1114714 

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reminder  letters  sent  to  self-reporting  individuals  (Hasseldine,  2007),  the  need  to  take 
indirect revenue into account when appraising the usefulness of an audit to ensure cost-
effectiveness  (Advani  et  al.,  2015),  and  the  inclusion  of  social  norms  messaging  to 
appeal to individuals’ sense of moral obligation (Larkin et al. 2018).  

Where  the  underlying  tax  morale  within  a  society  is  deemed  low,  increasing 
enforcement  efforts  will  have  a  marginal  effect.  Instead,  more  emphasis  must  be 
placed  on  responding  to  the  underlying  issues  driving  that  low  tax  morale  (Franic, 
2020).  As  Feld  and  Larsen  (2012)  noted,  ‘purely  relying  on  deterrence  without 
considering  social  norms  is  probably  an  insufficient  response  to  increasing  levels  of 
non-compliance’ (p. 100).  

4.3.2 Information, communications, social norms 

This section examines social norm interventions and other preventive approaches in more 
detail.  Interventions  within  this  category  aimed  to  provide  information  and  clear 
communication  to  individuals  and  firms  and  were  frequently  preventive  in  nature.  They 
focused  on  improving  tax  compliance  through  the  clear  communication  of  procedures, 
information  and  deadlines,  providing  further  information  and  transparency  on  the  way  in 
which  tax  is  used  within  the  wider  community,  and  appealing  to  the  moral  and  social 
obligation  and  significance  of  tax  compliance.  Such  interventions  were  deemed  effective 
in some Member States, as well as in the UK. 

In  Belgium,  simplified  messaging  from  the  national  tax  authority  demonstrated  clear 
effectiveness  in  increasing  tax  compliance,  as  did  the  use  of  deterrence  messages 
focusing on enforcement action or the issuing of financial penalties (De Neve et al., 2019). 
Such measures were consistent across taxpayer populations and throughout most of the 
tax-paying  process  in  reducing  levels  of  tax  non-compliance.  This  effect  diminished  as 
time  went  on,  with  further  enforcement  action  taken.  Significantly,  communications 
focussing on tax morale issues had no positive effect on compliance rates.  

In  Germany,  the  2004  Act  to  Combat  Undeclared  Work  and  Tax  Fraud  (SchwarzArbG) 
significantly  increased  the  likelihood  of  an  individual  being  identified  and  sanctioned  for 
engaging in undeclared work. It is also important, however, to examine the social norms 
that  underpin participation in undeclared work, with  a higher likelihood of engagement in 
undeclared  work  in  situations  where  it  was  considered  more  acceptable,  particularly 
between  private  individuals.  For  interventions  to  be  effective  they  must  address  the 
underlying  social  norms  and  make  participation  within  undeclared  work  socially 
unacceptable within the wider community.  

In  the  UK,  messages  were  sent  to  targeted  individuals  who  had  completed  self-
assessment  tax  returns  but  had  not  yet  paid  the  correct  amount.  These  messages 
focused on social norms and the moral duty to pay tax. They were deemed effective, as 
they  accelerated  the  rate  of  tax  payment  and  indirectly  reduced  enforcement  costs. 
Messages  were  particularly  effective  when  they  identified  an  individual  as  being  a 
part  of  a  minority  of  non-compliant  individuals  (Hallsworth  et  al.,  2017;  Larkin  et  al., 
2018).  

Key takeaways 

Indirect measures play an important role in tackling elements of undeclared work, 
especially those relating to tax non-compliance. Simplifying communications is a cost-
effective way of increasing compliance and reducing the overall costs of enforcement. 

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4.3.3 Regulation/laws 

Regulatory and legal interventions focus on changing the system landscape, including the 
targeting of wider socioeconomic systems that may be sustaining undeclared work.  

In  Italy,  stricter  employment  protection  regulations  led  to  a  higher  regulatory  burden, 
particularly  for  smaller  companies,  which  were  then  more  likely  to  seek  informal 
employment arrangements (Vallanti and Gianfreda, 2020). As such, there is potential for 
such legislation to lead to an expansion of undeclared work and adversely reduce 
the protection for certain categories of workers. Legislative and regulatory attempts to 
enhance  and  expand  enforcement  and  deterrence  (through  increasing  audits  or  fines) 
may deepen the loss in firms’ flexibility and productivity (Vallanti and Gianfreda, 2020) and 
should therefore be carefully balanced when considering the appropriate policy mix. 

Within  the  construction  industry  in  Germany,  statutory  chain  liability  within  the 
contracting  chain  demonstrated  some  effectiveness  in  protecting  workers’  pay  and 
enforcing  labour  rights  (Wagner  and  Berntsen,  2016).  In  2015,  the  Netherlands 
extended the chain liability measure to encompass the payment of wages under collective 
agreements. This resulted in some policy harmonisation across both countries, which is 
necessary  to  tackle  issues  around  cross-border  labour  mobility.  Prior  to  alignment, 
contractors  in  the  Netherlands  could  avoid  liability  by  hiring  temporary  employment 
agencies.  Further,  in  practice,  wages  under  collective  agreements  were  less  often  paid 
out fully as workers could not directly claim unpaid wages from the main contractor.  

Whilst statutory chain liability and regulatory harmonisation are considered effective policy 
tools, enforcement challenges remain. Regarding the measure itself, enforcement ability is 
hampered by sector- and item-specific legal loopholes and practical obstacles to statutory 
chain  liability.  Two  exemplary  scenarios  under  the  German  system  result  in  workers’ 
payments  being  incomplete  or  severely  delayed.  Given  statutory  chain  liability,  the  main 
contractor typically ensures their compliance through a system of checks such as signed 
declarations  from  all  employees  across  sub-contractors  that  they  are  receiving  the 
minimum wage and holiday pay. If the main contractor does cover any wage debt but the 
wages did not reach workers, court proceedings to enforce workers’ rights may be made 
more  complicated  by  the  need  for  additional  proof  for  workers  to  demonstrate  that 
payments  were  not  received.  This  case  may  occur,  if  the  sub-contractors  become 
insolvent and such payments are sequestered by national authorities.  

Employers’  liability  can  be  affirmed  under  conditions  of  effective  representation  of 
mobile EU workers and smooth cooperation across multi-layered enforcement structures. 
However,  at the time  of writing, mobile  EU workers  less  often joined trade  unions  of  the 
host country, amongst others, due to a lack of awareness or fear of employers’ retaliation. 
As  measures  to  overcome  the  representation  gap,  Wagner  and  Berntsen  (2016) 
recommend  the  possibility  of  trade  unions  to  undertake  collective  redress  as  well  as 
specialised 
initiatives.  Further, 
enforcement structures and responsibilities are fragmented with different rules at the level 
of the construction sites, company, region, nation, and EU.    

information  centres  and  cross-border 

trade  union 

Following the 2001 flat rate income tax reform in Russia, tax evasion reduced among 
taxpayers  who  experienced  the  largest  decrease  in  their  income  tax  rates 
(Gorodnichenko  et  al.,  2008).  The  introduction  of  such  legislative  changes  are  not 
themselves  sufficient  to  improve  tax  productivity,  but  in  countries  where  there  are 
prevalent levels of tax evasion, they can prompt a positive change.  

Key takeaways 

Legislative  and  regulatory  changes  are  important  in  tackling  undeclared  work. 
Legislative  options  need  to  be  carefully  balanced  to  ensure  that  they  enact 
positive change and avoid adverse situations of high regulatory burden or where social 

83 

 
 
 
EFFECTIVENESS OF POLICIES TO TACKLE UNDECLARED WORK  

and legal norms are not synchronised. Closing regulatory gaps is an ongoing task which 
can  be  supported  by  general  conditions  of  effective  representation  for  workers’ 
protection and cross-border cooperation on enforcement. 

4.4 

Evidence of policy combinations to effectively tackle 

undeclared work 

The  review  showed  that  the  literature  on  practical  design  and  implementation  of  a 
holistic  approach  is  still  in  its  infancy.  Experts  have  noted  a  lack  of  evidence  on the 
effectiveness of a holistic approach (Hallsworth, 201471; Williams, 201772). To do so would 
require a detailed analysis of different combinations and sequencing on the level of policy 
measures  alongside  an  examination  of  systemic  drivers.  Effect  sizes  should  be 
systematically  related  to  the  magnitude  of  impact  and  cost-benefit  comparison  of 
interventions,  rather  than  merely  making  approximate  comparisons  (Hallsworth  et  al., 
201773; Kleven et al., 201174). 

Few papers analysed the effect of a specific and robustly measurable policy intervention 
beyond deterrence measures. Even fewer studied a combination of policy measures in the 
same  paper.  The  14  studies  that  did  examine  combinations  typically  looked  at 
enforcement  together  with  at  least  one  other  type  of  intervention  (in  order  of  frequency: 
communication,  regulation,  financial  incentives).  Not  all  publications  investigating  policy 
mixes  used  quantitative  methods  (e.g.,  regression  models  with  interaction  terms)  or 
specifically  designed  quasi-experimental  studies.  Four  of  the  14  publications  drew 
theoretical  or  argumentative  links  based  on  laboratory  experiments,  qualitative  methods, 
or systematic reviews. While this points to an awareness in the literature that the enabling 
environment  is  key  to  effective  enforcement  policies,  the  sample  is  too  small  to  yield 
conclusions on patterns that drive findings of effectiveness.  

Assessing the advantages of coordinated EU-level action on undeclared work is hindered 
by  the  transferability  of  results  and  geographical  distribution  of  publications.  Research 
designs typically  focus  on a  single  country rather  than  comparing  countries  and  regions. 
Quasi-experimental  studies  have  questionable  transferability  of  results  to  different 
environments.  Similarly,  transposing  research  into  policy  is  particularly  challenging  for 
social  norm  messaging,  as  unacknowledged  deviations  are  likely  to  alter  effectiveness. 
Even  cross-country  studies  typically  ignore  the  impact  of  European  mobile  labour  and 
migrants.  

Nevertheless, this review shows the different perspectives on undeclared work in moving 
beyond  a  singular  approach  centred  on  enforcement  towards  a  holistic  approach.  The 
coding exercise balanced publications’ detailed insights with aggregate codes to address 
the broader research question. This, however, required focusing the quantitative analysis 
on  typologies  of  policy  interventions,  with  supplementary  contextual  information  on 
concrete policy from the database. 

Most importantly, the publications’ theoretical model on human decision-making correlates 
with  various  other  characteristics,  such  as  research  method,  geographical  scope,  and 
outcome  measure  of  undeclared  work  (see  Section  4.2).  Two  bodies  of  literature 
emerged.  Firstly,  a  social  actor  perspective  tended  to  use  qualitative  or  statistical 

71 Hallsworth, M., ‘The use of field experiments to increase tax compliance’, Oxford Review of Economic Policy, Vol. 30, No 

4, 2014, pp. 658–679. 

72 Williams, C., ‘Developing a Holistic Approach for Tackling Undeclared Work’, SSRN Electronic Journal, 2017. 
73 Hallsworth, M., List, J.A., Metcalfe, R.D. and Vlaev, I., ‘The behavioralist as tax collector: using natural field experiments 
pp.14–31, 

compliance’, Journal 

Economics, 

Public 

2017, 

148, 

Vol. 

of 

enhance 

to 
tax 
https://www.nber.org/papers/w20007.pdf   

74 Kleven, H.J., Knudsen, M.B., Kreiner, C.T., Pedersen, S. and Saez, E., ‘Unwilling or unable to cheat? evidence from a tax 

audit experiment in Denmark’, Econometrica, Vol. 79, 2011, pp. 651-692, https://doi.org/10.3982/ECTA9113  

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association  methods  to  investigate  a  theory  of  the  determinants  of  undeclared  work  or 
country-level  characteristics.  Research  focused  on  subjective  and  general  measures  for 
policy  approaches  and  undeclared  work  in  Central  and  Eastern  Europe,  as  well  as  the 
then  EU-28  data.  Secondly,  a  rational  actor  perspective  tended  to  be  associated  with 
empirical  studies  in  Western  Europe  and  international  developed  countries,  using  an 
observable measure for detecting tax non-compliance (as a proxy for undeclared work) in 
administrative datasets.  

Consequently,  the  potential  research  biases  and  validity  of  findings  are  likely  to  differ 
systematically  between  the  two  identified  bodies  of  literature.  This  includes  a  range  of 
biases  specific  to  research  methodologies  (e.g.,  interviewing,  subjective  measures, 
measurement error).75 It is also potentially subject to confirmation bias, where the authors’ 
hypothesis  (unintentionally)  affected  their  research  methodology  to  strengthen  the 
premise. In this case, the authors would have interpreted the data in light of its capacity to 
support their initial hypothesis.  

Neither body of literature suggests relying solely on enforcement, incentivising, or indirect 
interventions.  Rather,  a  range  of  measures  demonstrated  effectiveness  in  a  variety  of 
contexts. While enforcement activities are the predominant method of tackling undeclared 
work  and  attempting  to  reduce/transfer  undeclared  work,  the  need  to  supplement  such 
approaches  with  a  variety  of  alternatives  that  are  contextual  and  responsive  to  the 
targeted type of undeclared work is a recurring theme across the papers. 

The social actor body of literature argues for moving away from a predominant focus on 
direct  measures  (specifically  enforcement)  to  tackle  undeclared  work  towards  indirect 
measures.  The  literature  takes  a  system-level  approach  and  strongly  endorses 
aligning  and  raising  the  capacity  of  all  social  systems  simultaneously  to  enable 
declared  work.  This  includes  social  norms,  organisational  culture,  education,  and  the 
justice system. A frequently emphasised concern is that enforcement measures crowd out 
social  norms  and  should  be  used  as  a  last  resort.  Evidence  is  drawn  from  institutional 
asymmetry  theory,  laboratory  evidence,  qualitative  analysis,  and  regression  analysis  of 
the  Eurobarometer  survey  (which  measures  undeclared  work  from  the  perspective  of 
people  engaging  in  it).  Publications  studying  combined  policy  measures  typically  added 
interaction  terms  to  the  (probit)  regression  models  between  four  reported  explanatory 
measures (i.e., perceived risk of detection, harshness of sanctions, tax morale, horizontal 
trust). No consistent pattern emerges across the papers, possibly due to the limitations of 
regression analysis and subjective measures.76  

The rational actor body of literature generally ascribes the largest explanatory power 
to  enforcement  interventions,  meaning  that  they  achieve  the  largest  effect  sizes  in 
quasi-experimental studies and account for the majority of undeclared work, often proxied 
by tax non-compliance.77 Most publications did not focus on measuring the effectiveness 
of  indirect  measures,  even  if  their  recommendations  considered  these  in  a  wider  sense 
(e.g., from country context, further literature, or enforcement already operating optimally). 
The assumption is that people mainly engage in undeclared work due to the system 
and context (Kleven et al., 2010).  

These publications typically estimated the effectiveness of (multiple) single interventions. 
Yet, the standard rational actor model was frequently extended with behavioural insights 

75  The  complete  database  includes  papers  with  a  wide  range  of  methodological  approaches,  measurement,  and  scoping 
choices, as well as underlying theories of participation in undeclared work. There is no benchmark on the extent to which 
these  choices  influence  conclusions  on  the  effectiveness  of  policy  interventions.  However,  Hallsworth  (2014)  cites 
evidence of a weak relationship between reported and observed measures of undeclared work. For example, the Williams 
papers used perceived trust in institutions from Eurobarometer surveys, whereas Kluge and Libman (2017) used an index 
of court repressiveness and subsidy levels on firm registration.  

76  Research  designs  do  not  isolate  confounding  factors  such  as  risk  perception  and  socioeconomic  characteristics  by 
gender,  country,  age,  and  financial  situation.  It  is  harder  to  differentiate  several  forms  of  undeclared  work,  e.g., 
engagement in paid mutual aid and favours.  

77 By improving declaration of taxes and settling tax liabilities.  

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(e.g.,  ‘nudges’  towards  rational  decision-making)  or  consideration  of  the  information 
environment  (e.g.,  third  parties  double-reporting  income  from  employment).  Some 
publications investigated heterogeneous and saturation effects of enforcement, tending to 
look at distinctive research angles or designs (e.g., gender, industry sectors, employment 
status,  type  of  taxpayers,  type  of  income).  For  example,  Kleven  et  al.  (2011)  found  that 
audits were significantly more effective for self-employed people compared to dependent 
employees.  This  implies  that  expanding  third-party  reporting  and  formalising  businesses 
to  increase  company  size  seems  to  be  the  more  appropriate  strategy  (supply-side 
incentives and modernising formal institutions codes). The identified literature provided 
no analysis of sequencing policy measures.  

The  holistic  thinking  in  rational  actor-oriented  publications  relates  to  a  smaller  scale, 
partially due  to the research  method.  Quasi-experimental research  assumes  that  norms, 
firstly, hold constant any fixed or slowly changing contextual factors such as social norms. 
For  example,  publications  investigating  tax  enforcement  may  take  for  granted  the  given 
tax  system.  According to  Slemrod  (2016),78  the tax  system  is  a  set of  rules,  regulations, 
and procedures with three aspects: enforcement rules, remittance rules, tax base and tax 
rates.  The  three  aspects  are  intricately  related  and  have  a  substantial  influence  on  the 
enforceability of taxation.  

Key takeaways 

There is a lack of evidence on the effectiveness of combining and sequencing multiple 
policy measures. Papers typically do not contextualise statistical findings on effect sizes 
with the magnitude of impacts or a cost-benefit comparison.  

Two main bodies of literature emerge which differ in their assumptions about the drivers 
of  human  behaviour,  research  methods,  regional  focus,  and  proxy  measure  for 
undeclared  work.  This  can  risk  confirmation  bias,  hinder  combining  research  findings, 
and  create  a  trade-off  between  the  robustness/specificity  and  country  coverage  of  the 
research. 

The  main  debate  is  not  on  whether  to  utilise  multiple  policy  tools  but  the  degree  to 
which  they  contribute  to  effectively  reducing  undeclared  work.  First,  the  social  actor 
perspective  advocates  for  a  ‘holistic  approach’,  which  moves  away  from  the  dominant 
focus  on  deterrence,  towards  a  system-wide  enhancement  of  capacities  (including 
social  norms)  –  the  literature  remains  mostly  conceptual.  Second,  the  rational  actor 
perspective  aims  to  supplement  enforcement  measures  to  address  ‘residual’  tax 
evaders or increase cost-efficiency. Most papers studying concrete policy combinations 
adopt  this  perspective  to  look  at  enforcement  in  combination  with  communication 
(including behavioural insights), regulatory, and financial incentives.  

There  is  a  gap  in  research  in  linking  the  policy  approach  to  a  positive  outcome  in 
transforming undeclared work into declared work also across a long-term perspective. 

78 Slemrod, J., 'Tax compliance and enforcement: new research and its policy implications, SSRN 2726077, 2016. 

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5  Needs for future research 

Based on the high number of academic papers and grey literature reviewed for this study, 
the following recommendations emerge regarding future needs for research: 

  Studies should focus to generate evidence on results achieved by real-life policies 
(for  example  more  pilots  or  experimental  design  studies)  that  have  been 
implemented in Europe. Research needs to include the wider objectives of tackling 
undeclared  work  beyond  increasing  tax  revenues,  including  labour  market 
protection,  and  transforming  undeclared  into  declared  work.  Include  alternative 
policies  such  as active  labour market  policies to  provide  a  broader  understanding 
of the cost-effectiveness of undeclared work interventions in their research design;  
  There  is  a  need  for  more  formal  evaluations  of  policy  interventions  (ex-post 
evaluations  of policies  or  ex-ante  impact  assessments) to tackle  undeclared  work 
in Europe. These need to assess different combinations and sequencing of policy 
interventions.  Further,  effect  sizes  should  be  systematically  related  to  the 
magnitude  of  impact.  Cost-benefits  comparison  of  interventions  should  be 
than  merely  making  approximating  comparisons.  Policy 
undertaken,  rather 
monitoring  and  evaluations  should  include  more  collaboration  between  policy 
makers and research; 

  Adopt  research  designs  that  compare  countries  or  focus  on  macro-regions.  The 
transferability  of  research  into  policy  is  particularly  challenging  for  social  norm 
messaging since unacknowledged deviations from the studied implementation are 
likely to alter effectiveness.  

To  gather  more  insights  concerning  how  a  holistic  policy  approach  may  bring  effective 
results in tackling undeclared work requires understanding of the following aspects:  

  Understanding  the  sub-types  of  undeclared  work  is  needed  to  develop  a  multi-
dimensional  framework.  Better  indications  why  people  or  firms  engage  in  specific 
types of undeclared work could improve better targeting of policies. Focus should 
be on understanding the level of tax morale and social norms of a region to tackle 
social acceptance of undeclared work; 

  Understanding  the  approach  to  tackle  undeclared  work  (social  acceptance  as 
mentioned previously) or a risk-related clustering of types of undeclared work (high 
risk of poverty trap, health and safety damages, or gender segmentation) may help 
prioritise  further  policy  actions,  especially  when  considering  damage  to  workers. 
Linked  to  the  latter  are  the  issues  for  national  economies  -  for  example,  tackling 
poverty  decreases  involvement  in  undeclared  work  but  also  helps  to  reduce  the 
risk of social exclusion and costs for health and well-being (currently, however, this 
is not well evidenced in the available research etc.). To understand what works for 
policy-makers,  measures  need  to  be  accompanied  by  ex-ante  and  ex-poste 
evaluations; 

  Understanding  the  role  of  systemic  drivers  on  the  volume  of  undeclared  work  is 
important  such  as,  for  example,  understanding  the  role  of  precarious  forms  of 
formal  work  and  their  regulation  on  the  volume  of  undeclared  work  to  improve 
national regulatory frameworks. 

The  current  available  empirical  evidence  limits  recommendations  for  EU  regions  or 
clustering of countries and to link determinants to policy effectiveness from a holistic point 
of  view.  To  further  promote  the  drive  towards  holistic  policy  approaches  to  tackling 
undeclared work, a broader monitoring and evaluation framework on policy effectiveness 
would need to be developed. 

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6  Conclusions and recommendations 

Following  the  analysis  of  the  previous  chapters,  the  focus  of  this  final  chapter  is  to 
summarise the research findings and to provide a summary of:  

  The  characteristics  of  the  identified  types  of  undeclared  work  and  their  possible 

drivers; 

  The scale of identified types of undeclared work and the estimated damage; 

  The types of policies that have been implemented by EU Member States and their 
effectiveness in tackling undeclared  work to  understand if a holistic approach can 
be empirically evidenced; 

  The  extent  to  which  this  results  in  a  concrete  policy  intervention  matrix  to  tackle 

specific types of undeclared work. 

6.1 

Evidence on the types of undeclared work and their 

possible determinants 

The  aim  for  this  research  was  to  provide  a  multi-dimensional  overview  of  three  broad 
types of undeclared work that served as its starting point. These three forms were:  

  Unregistered employment;  
  Under-declared employment - including envelope wages; 
  Undeclared self-employment.  

The  legal  review  and  the  literature  broadly  confirm  these  types  of  undeclared  work,  yet 
further refinement focussing on sub-categories and their characteristics is required to help 
contextualise  and  target  policy  interventions.  This  is  specifically  the  case  for  more 
complex  forms  of  undeclared  work  (in  subcontracting  chains,  temporary  work  agency 
situations  or  platform  economy).  Such  attempts  have  been  made,  yet  such  endeavours 
are to date only partially able to produce an overview of undeclared work and its drivers.  

In  addition  to  these  definitions  the  research  found  that  bogus  self-employment  was  an 
additional  form  of  undeclared  work,  though  entirely  distinct  from  undeclared  self-
employment.  This  is  due  to  bogus  self-employment  being  incorrectly  reported  for  social 
security  purposes,  whereas  undeclared  self-employment  is  entirely  unregistered.  Bogus 
self-employment,  as  well  as  under-declared  self-employment  may  be  at  national  level 
more closely linked to taxation and social security contribution fraud.  

The    review  of  legal  definitions  of  undeclared  work  also  pointed  out  that  some  forms  of 
undeclared work are identified as more severe. This is the case for ‘organised undeclared 
work.’  In  addition,  some  Member  States  also  recognise  ‘facilitators  of  undeclared  work’ 
and  ‘advertisers’.  However,  the  literature  has  not  further  analysed  the  role  of  different 
stakeholders  contributing  to  undeclared  work.  It  would  however  be  useful,  when 
considering  complex 
is  also  an  absence  of 
understanding more specifically of how undeclared is dissimulated in practice (specifically 
money flows).  

forms  of  undeclared  work.  There 

When  (legal)  definitions  focus  primarily  on  the  type  of  ‘violation’,  such  as  on  the  non-
declaration of employment, these definitions are only able to offer a partial account of the 
phenomenon  and  are  limited  in  their  understanding  of  the  damage  for  the  stakeholders 
involved  (especially  the  damage  caused  to  workers,  or  other  businesses  operating 
lawfully) that each of these types of undeclared work produce.  

Similarly,  focussing  on  certain  metrics  for  understanding  the  success  of  policies  can  be 
unhelpful,  simply  offering  a  metric  that  is  disconnected  from  an  underlying  qualitative 

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understanding of the mechanisms of change. For example, focussing on the level of fines 
collected  when  penalising  those  involved  does  not  provide  any  information  about,  if  the 
fines were paid, what those fines have been used for or whether those fined transformed 
their  undeclared  practices  into  declared  practices.  Furthermore,  when  evidence  is 
provided  that  demonstrates  the  conversion  of  employment  violations  into  formal 
employment  there  is  a  lack  of  longitudinal  or  follow-up  work  that  provides  clearer  and 
deeper insights into the changes that took place for the worker, and whether their quality 
of life or precarity of employment were improved.  

As such, there is an overarching issue within the field to embed research into theoretical 
models to portray the motivations of those engaging in undeclared work. For example, the 
reporting  on how  combating  poverty  also  helps  to  tackle  undeclared  work  and  ultimately 
has the potential to improve the quality of life of those that such policies help. There have 
been  some  attempts  to  achieve  this,  namely  the  model  offered  by  Pfau-Effinger  (2009) 
that delineates key individual motivations into undeclared work types: 

  Type  1:  The  ‘poverty  escape’  type  –  supplied  by  workers  with  the  aim  to  avoid 

immediate extreme poverty; 

  Type 2: The ‘moonlighting’ type – self-employment as a side-job 
  Type 3: The ‘solidarity orientated’ type – exchange of goods and services to build a 

social network. 

Still, more is needed here to fully supplement the theoretical models outlined earlier in this 
report. The typology above does not include for example those that want to gain and profit 
at  a  maximum  from  their  business  activities  and  not  pay  their  fair  share  in  the  form  of 
taxation or wages and employment conditions.  

Finally,  there  is  no  empirical  evidence  concerning  the  role  of the  type  of  payments  used 
(whether cash or cashless or in-kind etc.) for undeclared work and the types of undeclared 
work.  

A large variety of drivers were mentioned in the research reviewed. Results confirmed the 
relevance of some individual level socio-demographic drivers for unregistered and under-
declared  employment,  as  well  as  ‘other  violations’  (fraudulent  forms  of  contracting).  No 
evidence  was  found  for  drivers  of  undeclared  self-employment.  The  available  research 
also  lacks  understanding  of  more  systemic  drivers  that  impact  on  types  of  undeclared 
work.  

In  relation  to  socio-demographic  and  individual-specific  drivers  the  analysis  reveals  that 
gender and age clearly play a direct and indirect role in undeclared work, yet the available 
evidence  can  demonstrate  only  the  obvious.  Only  a  few  pointers  are  of  interest  in  this 
regard: 

  A  trend  that  men  are  more  likely  to  participate  in  under-declared  work  was  found 
(albeit with variations depending on the sector focused on in the studies). Gender 
is insignificant for unregistered employment; 

  There  is  no  general  link  between  level  of  education  and  provision  of  undeclared 
work.  Rather,  limited  evidence  points  out  that  bogus  self-employment  might  be 
more  prevalent  among  highly  educated 
than  among  unskilled 
individuals.  In  addition,  the  quasi-formal  realm  appears to  embrace  both  low-paid 
workers and those in the upper tier of the workforce; 

individuals 

  Undeclared  work  is  more  prevalent  in  small  and  micro  companies,  particularly  in 

businesses operating in agriculture and construction. 

In relation to the economic and wider systemic drivers  of undeclared work, systematised 
findings failed to provide a clear answer about the relevance of the tax burden. Although a 
substantial number of studies pointed in both directions, those that did not find any effect 
prevailed.  

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Despite limited data, some drivers of undeclared work were evident. For instance, the lack 
of financial resources is an important factor encouraging workers to engage in undeclared 
work. Migrant or immigrant background was found as having no significant effect on taking 
up undeclared work.  

Although some labour suppliers participate in undeclared work out of necessity, many do 
so  simply  to  defy  the  authorities  and/or  to  increase  their  wealth.  Dissatisfaction  with  the 
work of public administration, distrust in the authorities, and low tax morale are the most 
important motivators. Nevertheless, there is an important gap in the literature in respect of 
other  systemic  drivers,  which  prevented  any  conclusions  being  drawn  on  the  role  of 
corruption, repression,  rule  of  law,  ease  of  doing  business,  quality  of social  security,  the 
viability  of  the  pension  system,  and  other  country-level  peculiarities  underlined  in  the 
literature as likely determinants of undeclared work. 

Building  a  multi-dimensional  typology  for  drivers  and  types  of  undeclared  work  that 
accounts for both the risks and motivations, at both the structural (or systemic drivers) and 
individual  level  was  only  partially  possible  due  to  gaps  in  the  empirical  evidence  as 
highlighted.  

6.2 

Volume of undeclared work and damage for the EU 

economy 

A  number  of  studies  estimate  the  volume  of  undeclared  work  at  the  national  level. 
However, due to the divergent methodologies used to estimate the size of the undeclared 
economy  these  studies  cannot  be  compared.  Only  few  multi-country  studies  exist  for 
different  time  periods  but  also  not  using  the  same  method  of  estimation  for  undeclared 
work. This limits comparability.  

Five  recent  studies  were  identified  and  show  trends  of  volume  of  undeclared  work  over 
time  in  EU  Member  States.  For  2017  a  study  estimated  that  the  average  size  of  the 
shadow  economy  in  the  EU-27  was  16.3%  of  GDP  at  market  prices  (current  prices).  A 
study estimated in 2019 the share of undeclared work averaged 14.8% of GVA in the EU-
27. Estimates suggest that the shadow economy and the share of undeclared work in the 
EU-27 shrunk over the past 10 years.  

Studies  carried  out  so  far  have  not  evaluated  the  damage  of  undeclared  work  for  the 
economies in EU Member States and related stakeholders. Hence, estimates have been 
calculated  for  the  purposes  of  this  study.  The  damage  of  the  shadow  economy  and/or 
undeclared  work  can  only  be  estimated  in  terms  of  lost  government  revenue.  For  the 
shadow  economy  this  represents  13.9%  for  the  EU-27  (based  on  2017  data)  of 
government spending. For undeclared work this represents 6.5% (based on 2019 data).  

Most undeclared work occurs in employment relationships (under-declared work). Of the 
6.5% of lost government revenue, 4.1% related to under-declared employment. 

Nevertheless,  this  needs  to  be  read  with  caution.  For  example,  in  a  case  where 
undeclared  work  is  predominantly  a  ‘poverty  escape’,  it  means  that  public  interventions 
should  aim  to  improve  income  of  households  (e.g.,  higher  benefits  for  minimum  income 
schemes  to  delimit  the  risk  of  poverty)  or  other  measures  should  improve  welfare 
distribution,  labour  market  access  or  wages  for  example.  If  such  interventions  have 
contributed  to  reduce  undeclared  work  or  contributed  to  delimit  the  loss  of  taxes/social 
security payments, it was not evidenced in research that has been collected for this study. 

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6.3 

Evidence of policies effectively tackling undeclared 

work 

As  outlined  in  Chapter  4,  a  range  of  policy  interventions  demonstrated  effectiveness  in 
tackling  the  volume  of  undeclared  work.  Across  papers  focussing  on  enforcement 
interventions  there  was  a  clear  demonstration  of  the  effectiveness  of  measures  such  as 
audits  and  inspections,  but  the  conclusions  from  these  papers  noted  the  need  for  care 
when  implementing  measures  of  direct  deterrence.  Namely,  that  such  measures  are 
utilised appropriately and discriminately with a clear understanding of the context in which 
they are being deployed. A failure to do so can have the adverse result of increasing the 
level  of  undeclared  work  or  tax  non-compliance  as  firms  and  individuals  feel  unfairly 
targeted, overly surveyed, and controlled. Importantly, a key takeaway from these studies 
was  the  recognition  that  enforcement  activities  offer  diminishing  returns  in  their 
effectiveness and are never able to fully transfer undeclared work into declared work. As 
such,  papers  argue for  a  combination  of  interventions  to  ensure  an  optimal  enforcement 
strategy.  Such  a  combination  included  an  increase  in  public  awareness  around  tax 
compliance requirements (Lesnik, Kracun, and Jagric,  2014), a combination of audit and 
penalty reminder letters sent to self-reporting individuals (Hasseldine, 2007), the need to 
take  indirect  revenue  (revenues  generated  by  side  activities  not  the  core  business)  into 
account when appraising the usefulness of an audit to ensure cost-effectiveness (Advani, 
Elming, and Shaw, 2015), and the inclusion of ethical messaging to appeal to individuals’ 
sense  of  moral  obligation.  Nevertheless,  there  is  a strand  of literature  that  highlights  the 
importance  of  understanding  and  targeting  the  underlying  tax  morale  within  a  region  to 
ensure effective enforcement. Where tax morale is low, enforcement alone will not remedy 
the issue of undeclared work (Franic, 2020). Interventions aimed at improving information 
could  therefore  also  be  prioritised,  as  they  are  deemed  effective  to  counter  undeclared 
work. 

Information  and  clear  communication  of  tax-compliance  processes  offered  demonstrable 
progress  in  accelerating  tax-payment  rates  and  in  improving  overall  compliance.  There 
are two aspects here, one is systemic and structural focussing on the administrative and 
bureaucratic  structures  of  a  region,  the  other  focusses  on  the  identification  and 
communication with firms  and individuals to improve tax compliance. If a region is noted 
for  having  burdensome  administrative  processes  and  systems,  then  measures  must  be 
taken to streamline and improve these. As demonstrated in Belgium, the simplification of 
messages sent from the national tax authority increased tax compliance rates (De Neve, 
et al. 2019). Similarly, in regions where tax morale is demonstrated to be high, there has 
been some effectiveness of communications that appeal to local social and moral norms, 
and  that  identify  individuals  as  being  part  of  a  minority  of  non-compliant  individuals 
(Hallsworth  et  al.  2017;  Larkin  et  al.  2018).  An  important  point  to  consider  here  is  the 
implementation  cost  of  such  an  initiative.  Communication  campaigns  are  cost-effective 
along two fronts: firstly in increasing tax compliance, secondly in the subsequent reduction 
in costs related to enforcement activities and as such form an important supplementation 
to direct enforcement interventions.   

Legislative interventions have significant potential in closing regulatory gaps, in enhancing 
worker protections, in offering relief to taxpayers (Gorodnichenko, Martinez-Vazquez, and 
Sabirianova,  2008),  and  in  expanding  the  enforcement  capacities  of  national  authorities. 
More  attention  is  needed  for  a  coherent  legal  approach  regarding  what  is  considered 
undeclared  work,  how  it  is  sanctioned  (administrative  fee,  other  sanctions)  and  how  it  is 
distinguished  from  corruption,  fraud,  tax  criminality,  and  money  laundering.  Regulatory 
options need to  be carefully worked out and balanced. As demonstrated in Italy (Vallanti 
and  Gianfreda,  2020),  the  unintended  consequence  of  legislate  action  increased  the 
regulatory  burden  on  smaller  firms  that,  in  seeking  to  alleviate  the  burden  of  increased 
regulation, turned to informal employment arrangements.  

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Finally,  weaknesses  in  the  operation  of  public  administration  should  be  detected  and 
corrected  to  improve  administrative  interventions  with  more  effective  services  provided, 
giving more comprehensible information and tax collection systems.  

The diversification of enforcement teams within national tax agencies to include IT experts 
alongside  traditional  inspectors  to  ensure  agencies  are  able  to  keep  pace  with  digital 
transformations and digital aspects of undeclared work, is also a point for consideration.  

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