1. Lessons from the Eurobarometer 2007 SUBLEC International workshop Brussels 25 February 2008 Presented by: Arnold Riedmann, TNS Infratest Sozialforschung, Munich

2. 2 Sozialforschung Contents 1.Introduction: (a) Background (b) Concept (c) Methodology 2.Participation in undeclared work (UDW): Some EB figures on the quantitative dimensions 3.Selected figures on structures and motives 4.Lessons learnt and recommendations for future surveys

3. Introduction: Background, methodology and concepts Sozialforschung

4. 4 Background Major challenges of a cross-national survey on ‚unlawful behaviour‘: Country differences regarding the rules of taxation Differences in the acceptance of UDW among population Differences in the public interest/debates on the topic 2006: Feasibility study on a direct survey on UDW Review of previous surveys Proposal for a survey design Recommendation to test 2 different questionnaire approaches in pilot survey: (A) The „explicit approach“: Asks directly for undeclared activities which would have to be declared but were not  Respondent is assumed to be fully aware of tax legislation Uses the commonly known national term for „undeclared work“ (B) The „implicit approach“: Asks first for various types of working activities, then asks whether income from these was declared or not

5. 5 Sozialforschung Survey concept applied in the Eurobarometer Only ‚explicit approach‘ tested in the Eurobarometer Introduction by some general questions on the supposed spread and structures of UDW Explicit definition of UDW given to the respondents: „Activities not or not fully reported to the tax or social security authorities and where the person who acquired the good or service was aware of this.“ Concept includes both the demand and the supply side UDW for money and UDW done for payment in kind (exchange of services, payment with goods)

6. 6 Sozialforschung Methodological characteristics of the EB Face-to-face interviews (mostly CAPI, partly paper & pencil) Random walk Net sample size: ~ 1.000 interviews in most of the countries UDW module as part of an omnibus survey with various other topics Respondent‘s decision on participation in the survey not based on attitude towards UDW  General response rate does not allow conclusions on the acceptance of the survey!  Some hints on the acceptance can be derived from rates of item-non- response in the core questions on the participation in UDW

7. 7 Sozialforschung AB CD Types of undeclared work that can be covered by a survey among individuals individual (supply/doer) firm (demand/purchaser) individual (demand/purchaser) UDW firm (supply/doer) Covered from the supply perspective (envelope wages) Covered from two perspectives: supply & demand Covered from the demand perspective Cannot be covered by a direct survey among individuals

8. 8 Sozialforschung Coverage of UDW of immigrants Supply perspective of UDW done by individuals ("Did you do undeclared work?") Demand perspective of UDW done by individuals for private HH ("Did you buy undeclared work?") immigrants problems of accessibility and language immigrants Answers from demand perspective independent of accessibility and language of supplier.

9. Participation in undeclared work: Some EB figures on the quantitative dimensions Sozialforschung

10. 10 Sozialforschung Demand of UDW by country Sozialforschung EU-27: 11% Base: total population aged 15+ "Have you in the last twelve months acquired any goods/services of which you had a good reason to assume that they embodied undeclared work?"

11. 11 Sozialforschung Supply side I - Supply by country Sozialforschung EU-27: 5% Base: total population aged 15+ "Did you yourself carry out any undeclared activities in the last 12 months for which you were paid in money or in kind? Herewith we mean again activities which were not or not fully reported to the tax or social security authorities and where the person who acquired the good or services was aware of this?"

12. 12 Sozialforschung Supply side II - Envelope wages by country Sozialforschung EU-27: 5% Base: DEPENDENT EMPLOYEES ONLY! "Sometimes employers prefer to pay all our part of the regular salary or the remuneration for extra work or overtime hours cash-in-hand and without declaring it to tax or social security authorities. Did your employer pay all or part of your income in the last 12 months in this way?"

13. 13 Sozialforschung Supply III – Total supply EU-27 Sozialforschung Base: total population aged 15+ Envelope wages as specific part of supply side to be added to the „normal“ measured supply for a full picture of theundeclared work measured with the survey 5% envelope wages among dependent employees = 2% envelope wages calculated on base of total population (15+) ~1% overlap (people reporting both the „normal supply“ of UDW and the reception of envelope wages +=

14. 14 Sozialforschung Supply side IV - Total supply by country Sozialforschung EU-27: 6% Base: total population aged 15+

15. 15 Sozialforschung Amount of supplied undeclared work Average annual hours per involved person (for most important undeclared activity only!) (calculated as no. of weeks having worked undeclared x average no. of hours per week) Sozialforschung Base: total population aged 15+ Southern European countries Eastern/Central European NMS EU-27 Continental countries incl. UK and IE Nordic countries

16. 16 Sozialforschung Comparison of EB indicators on participation in UDW Continental countries (as % of population) Sozialforschung Base: total population aged 15+

17. Structure and motives – Selected figures Sozialforschung

18. 18 Sozialforschung Structure of undeclared work: By sector Envelope wagesOther supply of udw Others Hotel, restaurants Repair Pers. Services Transport Household Services Construction Industry Retail Agriculture Difference to 100%: DK/NA

19. 19 Sozialforschung Destinators (for whom?) Base: Suppliers of „other“ undeclared work (except envelope wages) Personal environment: Friends, colleagues, relatives, neighbours Firms or businesses Other private persons Others

20. 20 Sozialforschung Reasons for doing undeclared work (Supply side) Base: Suppliers of other undeclared work (except envelope wages) Both parties benefited from it It is just a seasonal work and so it is not worth to declare it You could not find a regular job Working undeclared is common practice in your region/ sector of activity so there is no real alternative Taxes and/or social security contributions are too high The person(s) who acquired it insisted on the non-declaration Bureaucracy/red tape to carry out a regular economic activity is too complicated You were able to ask for a higher fee for your work The state does not do anything for you, so why should you pay taxes Multiple responses

21. 21 Sozialforschung Comparison of perceived detection risk and reported supply of UDW Sozialforschung Base: total population aged 15+

22. 22 Sozialforschung Alternatives to buying UDW I would have renounced from purchasing this good or service I would have bought it from the regular market The job would have been done by myself or another member of my household I would have postponed the acquisition of this service or good Others, DK, NA

23. 23 Sozialforschung 12345678910 Acceptance of different forms of unlawful behaviour in society (scale from 1 = absolutely unacceptable to 10 = absolutely acceptable) Sozialforschung Base: total population aged 15+ Countries with lowest levels of acceptance of UDW: CY, MT, FI, EL Countries with highest levels of acceptance of UDW: LT, AT, SK, BE, BG, PL, HU Using public transport without valid ticket 2,8 Reception of welfare without entitlement 1,9 UDW by private person for firm (envel.) 2,3 UDW by firm for firm 2,1 UDW by firm for private HH 2,4 UDW by private person for private HH 3,5

24. Lessons learnt from the EB and recommendations for a national Belgian survey on undeclared work Sozialforschung

25. 25 Sozialforschung Achievements of the EB pilot survey Worked well in some countries, as far as can be judged on base of existing other information sources; problem: there is no benchmark for measuring the validity of the results Envelope wage question module provided plausible results as far as country differences are concerned and gave valuable structural insight into the phenomenon Showed broad variety of forms of undeclared work with different characteristics Information on sectors and groups of persons most affected by UDW Insight into people‘s motives for doing UDW (e.g.: bureaucratic hindrances are not the main motive for most groups) Policy-relevant information on alternatives people would choose if UDW was not available (  amount of UDW potentially transferable to regular employment)

26. 26 Sozialforschung Observed weaknesses of the EB survey concept on UDW Measured levels of participation in UDW for some countries unrealistically low Generally: direct survey shows only lower level of participation in UDW In some countries only specific parts of undeclared work satisfactorily captured with the survey (e.g.: hardly any construction work in Southern Europe) Possible explanations: UDW done for payment in kind obviously covered to a relatively small degree only Applied questionnaire concept presupposes that people know taxation rules Complex definition of UDW in the questionnaire possibly not well understood by parts of respondents (e.g. by lower educated people)

27. 27 Sozialforschung Assessment by regions EB concept worked well in the three Nordic countries (DK, FI, SE) Worked obviously well in some Continental countries, for many others an assessment is difficult in lack of statistical data Mixed results from Eastern/Central European NMS: Survey revealed large importance of envelope wages Other forms of UDW likely to be underestimated Picture for Southern Europe most unsatisfactory: Partly large differences between supply and demand (presumably large parts of UDW done by immigrants) Large differences between perceived and reported level of UDW Generally unexpectedly low measures Certain parts obviously hardly covered (e.g. construction work)

28. 28 Sozialforschung Proposals for improving the instrument Test both questionnaire approaches against each other (explicit vs. implicit) Adapt questionnaire(s) to Belgian situation (e.g. specific priming questions) Simplify questionnaire: Simplification of the definition of UDW Separation of UDW paid in money and UDW paid in kind (or: Skip ‚in kind‘) Concentration on a set of core structural indicators Skip questions about monetary categories Positive experiences with envelope wage module  custom-tailor of further questions to specific occupational groups (e.g. self-employed)? Consider methods for covering undeclared work done by immigrants, e.g.: Ask purchasers of UDW on nationality of supplier Additional questionnaire versions in languages spoken by most relevant groups of immigrants Higher number of interviews (minimum: 3.000)

29. Thank you for your attention! Sozialforschung