The Shadow Labor Market - Why is it a Problem and How to Address It?
This course will be delivered as part of the Tax Policy and Administration Learning Program, primarily supported by the Dutch Ministry of Finance, International Monetary Fund, and the Ministry of Finance of Slovenia. The overall objective of the program is to contribute to strengthening of beneficiary institutions’ capacity in implementing the EU recommendations under which the revenue authorities can deliver tax compliance risk management.
ABOUT THIS LEARNING EVENT
What you will learn
A large share of the shadow economy is undeclared work which refers to the wages that workers and businesses do not declare to avoid taxes or labor market regulation. The course will look into factors that have contributed to concerns over a growing scope for undeclared work and will discuss measures that can be at the tax administration level pursued to reduce the size and growth of the undeclared economy. Experience across SEE and beyond shows that while a deterrence approach, which seeks to increase the actual or perceived likelihood of detection and penalties, remains the dominant approach when tackling the undeclared work, many tax administrations in close co-operation with other relevant government bodies have begun to take more preventive measures that include communication and raising public awareness campaigns along with simplification of administrative procedures, enabling easier and proper fulfillment of legally prescribed tax obligations.
This course will address the main causes behind shadow labor market. It will describe taxonomy of types of underground economic activities, seek answers with regards to what extent the shadow labor market is an issue of high tax burdens, intensity of regulation, complexity of the tax system, and other driving forces of this phenomenon. The course will also address the question of how tax administrations can limit significant losses through unreported income. Discussions will focus on what actions the tax administrations can take to tackle the shadow labor market and in particular how to influence the tax morale.
Tax officials will be invited to share their administrations’ efforts in combating undeclared employment in sector specific areas such as construction, tourism and similar.
How you will benefit
This learning initiative will include a combination of presentations by subject-matter experts, as well as group work activities and individual presentations, followed by answer and question sessions.
Participants will be encouraged to share information on national strategies for fighting the shadow labor market, with a particular focus on improving tax compliance. An important feature of this event will be the valuable exchange of experiences of tax authorities across SEE supported with examples of efficient practices.
By the end of the course, participants will have:
- Learned about what fuels the shadow labor market and what motivates people to engage in it
- Learned about the correlation between shadow labor market and the degree of economic recovery
- Learned about the importance and means of communication between citizens and governments
- Learned about the necessity of raising understanding of the role played by taxes in achieving social objectives, as well as about different indirect positive/motivational measures to confine the scope of the shadow labor market
- Learned about other structural incentives within tax system, income-dependent social benefits, labor market, link between contributions and benefits, and others
- Gained new insights into the range of compliance and investigative strategies that countries can adopt in their attempts to fight against shadow labor market
- Learned by exchange of experiences from other countries
Who should attend
The course has been designed for mid to senior level tax officials from the Risk Management, Audit, Criminal Tax Investigation, Analytics, Anti-Fraud or Tax Police Department and the representatives of Tax Policy divisions in the Ministry of Finance who are involved and/or have experience with the fighting the shadow economy.
Participants are expected to take an active part in the workshop activities. The success of the workshop is directly dependent on the participants’ active engagement in the discussions and group work.
In view of the interactive nature of the event, it will be helpful if participants have a good command of the English language as there are no interpretation services planned.
Henk Ruitenbeek, Tax and Customs Administration, Ministry of Finance, Netherlands
Christopher Barlow, Resident Revenue Administration Advisor - Serbia, International Monetary Fund
No fee will be charged for officials working in the public sector. Workshop will be held in English.
The costs of travel and accommodation for two participants from Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Macedonia, Moldova, Mongolia, Montenegro, Romania, and Ukraine will be covered by the Dutch Ministry of Finance.
Additional participants from the above mentioned eleven countries or those applying from other CEF constituency (Albania, Kosovo, Serbia, Slovenia and Turkey) will have to be sponsored by other sources, e.g. their sending or sponsoring institutions.
Applicants will be approved, accepted and notified by the CEF.
- The Shadow Economy and Shadow Labor Force: A Survey of Recent Developments, Friedrich Schneider, IZA DP No. 8278, June 2014
- Revenue Administration: Managing the Shadow Economy, Barrie Russell, Fiscal Affairs Department, International Monetary Fund, June 2010
- Hiding in the Shadows, The Growth of the Underground Economy, Friedrich Schneider with Dominik Enste, © 2002 International Monetary Fund
- Shadow Work, Ivan Ilic, Philosophica 26
This learning initiative is supported by: