Developing a Holistic Approach for Tackling Undeclared Work
Developing a Holistic Approach for Tackling Undeclared Work: A Learning Resource from the Seminar of the European Platform Tackling Undeclared Work, December 2, 2016
25 Pages Posted: 21 Mar 2017
Date Written: March 20, 2017
On 2 December 2016, the European Platform Tackling Undeclared Work organised a seminar in Brussels on developing a holistic policy approach. The aim was to enable Platform members and observers to consider a holistic policy approach towards tackling the undeclared economy. Consequently the seminar focused on an approach which uses, in a strategic and coordinated manner, the full range of both the direct and indirect policy approaches and measures available to increase the power of, and trust in, authorities respectively. The seminar brought together Platform members from all 28 EU Member States (MS) and Norway (EEA) – including representatives of national ministries, labour inspectorates, social security authorities, and tax and customs authorities – as well as European-level social partners and international organisations.
Key findings: There was widespread support for a more holistic approach towards tackling the undeclared economy. It is an issue which affects many aspects of the economy and society, through for example breaches of workers’ rights, unfair competition and reduced tax revenues. For this reason, a joined-up, integrated response is essential.
• Achieving a holistic approach to tackling undeclared work is nevertheless a challenge. A wide range of public sector stakeholders need to cooperate and work closely with social partners. Some countries have successfully developed new structures to ensure greater collaboration, which will lead to a more effective and efficient response to the problem of undeclared work.
• Examples of national action plans, national institutions and joint operations were presented at the seminar, ranging from national action programmes (Finland, Greece), to a national electronic register of employment (Estonia) and a new national labour inspectorate (Italy). Together with Norway and France, which presented examples of how to promote collaborative working, these practices showed how a more holistic approach can be achieved by stakeholders working together.
• It is a widely accepted policy objective not to aim to eradicate the undeclared economy, but rather to move undeclared work into the declared economy. The result is that the dominant policy approach across the Member States of using direct controls to deter engagement by increasing the risks of detection and penalties, i.e. ‘sticks’, is being increasingly complemented by a wider range of measures, including preventative and curative incentive measures, i.e. ‘carrots’.
• How to most effectively combine and sequence these approaches and measures remains subject to debate and it is important to recognise that what works in one country may not work in another. There is an emerging evidence-based consensus, nevertheless, that the most effective approach is to concurrently improve both the power of authorities using direct measures, i.e. enforced compliance, as well as trust in authorities using indirect measures, i.e. voluntary cooperation. The slippery slope framework presented at the seminar suggests that a combination of both greater trust in authorities and greater power of authorities ensures compliant behaviour.
Keywords: informal sector, informal economy, tax evasion, European Union, public policy, shadow economy
JEL Classification: H26, J48, J46, K34, K42, P17, P2, P3
Suggested Citation: Suggested Citation