What is it about?

Non-compliant practices are deeply ingrained in FYR of Macedonia. Some 35% of adult Macedonians use personal connections in order to circumvent formal rules and procedures, 17.7% purchase undeclared goods and services, 6.1% work in the undeclared economy, and 13% of employees receive envelope wages from their employer, providing an additional 39% to their net income. The GREY project research findings reveal that tax morale and personal views on the extent to which others participate are key determinants. The lower one’s tax morale (i.e., level of 'vertical trust'), the higher is the propensity to participate in the undeclared economy. Likewise, the higher is the perceived number engaged in such activity (i.e., the level of 'horizontal trust'), the more likely is a citizen to engage in illegitimate economic practices

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Why is it important?

 Undeclared work has deep roots in FYR of Macedonia. 1 in 16 adults and 1 in 8 of the employed engage in undeclared work. The use of informal connections to circumvent formal institutions is practiced by 35% of Macedonians.  Formal institutions in the country are underdeveloped. Unemployment also remains unusually high compared with the EU average.  The traditional repression approach to tackling undeclared work, which has been prioritised so far by the authorities, is ineffective.  Increasing penalties and surveillance/ control should at the very least be supplemented by public awareness raising campaigns, educating citizens, and the further modernisation of the state institutions.  The government should increase spending on the socially excluded, including among the ethnic Albanians.

Perspectives

Displays the need to develop trust in institutions to tackle undeclared work in FYR of Macedonia.

Professor Colin C Williams
University of Sheffield

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This page is a summary of: Tackling Undeclared Work in the FYR of Macedonia: Knowledge-Informed Policy Responses, SSRN Electronic Journal, January 2017, Elsevier, DOI: 10.2139/ssrn.3026358.
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