An evaluation of the diverse varieties of undeclared work in the UK and EU-27 Professor Colin C Williams University of Sheffield, UK Technical Workshop on Labour Inspection and Undeclared Work, 29-30 October 2009, Budapest

Definition of undeclared work Any paid activities that are lawful as regards their nature but not declared to the public authorities, taking into account the differences in the regulatory system of Member States (European Commission, 2007: 2)

Nature of Undeclared Work in UK and EU-27 Conventional view: low-paid undeclared waged employment conducted under exploitative working conditions by marginalised groups out of economic necessity as a last resort Begun to unravel diversity of undeclared work: Waged employment vs. self-employment Diverse forms of undeclared waged employment Envelope wages Diverse forms of undeclared self-employment Hidden enterprise culture Paid favours

Configuration of undeclared work % of all UDW: UK EU-27 Undeclared waged employment 15 20 Self-employment for family, friends, neighbours & acquaintances 70 55 Self-employment for other private persons/households Other/don’t know/refusal - 5

Spatial variations in the nature of undeclared work UDW has different meanings in different places. Waged employment: greater proportion is waged work in southern Europe and East-Central Europe Higher proportion is self-employment in Continental Europe & Nordic nations More likely to be for kin, friends and neighbours in Nordic & Continental countries Envelope wages: heavily concentrated in East-Central Europe

Participation rates in undeclared and under-declared work: by EU region Country % participating in UDW in last 12 months Any UDW or envelope wages Solely UDW Solely envelope wages Both UDW and envelope wages No UDW or envelope wages All 9 4 1 91 East-Central Europe 18 11 3 82 Nordic nations 12 10 88 Continental Europe 5 95 Southern Europe 8 2

Regional Variations in the nature of UDW: EU-27

Approach Method Measures Deterrence Improve detection Data matching and sharing Joining-up strategy Joining-up operations Increase penalties Increase penalties for evasion Enabling compliance Preventative Simplification of compliance Direct & indirect tax incentives Smooth transition to self-employment Introducing new categories of work Micro-enterprise development Curative/ Stimulating Demand-side incentives - service vouchers; targeted direct taxes; targeted indirect taxes Supply-side incentives - society-wide amnesties; voluntary disclosure; business advisory services Fostering commitment Education Peer-to-peer surveillance Tax fairness; Procedural justice; Redistributive justice

UK policy measures: return/cost ratios Approach Method Measure Return/cost ratio Deterrence Detection All detection measures Tax evasion hotline 5:1 2:1 Enabling Preventive Curative VAT amnesty 23:1 Commitment Advertising campaigns 19:1