Assessment of Under-Declared Employment in Croatia

Abstract

This report evaluates ‘under-declared employment’, which is the practice where a formal employer pays a formal employee an official declared wage but also an additional undeclared (envelope) wage in order to evade the full social insurance and tax liabilities owed. The aim is to evaluate the prevalence, characteristics and distribution of this fraudulent wage practice in Croatia, to explain its existence, and to provide an evidence-based evaluation of the different policy approaches for tackling it, and a set of policy recommendations.

Keywords: informal economy, shadow economy, tax evasion, labor economics, informal sector, Croatia

JEL Classification: H26, J48, J46, K34, K42, P17, P2, P3