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Tackling the illegitimate under-reporting of salaries in Southeast Europe: some lessons from a 2015 survey in Bulgaria, Croatia and FYR Macedonia

Colin Williams and Josip Franić ()

Eastern Journal of European Studies, 2017, vol. 8(1), 5-28

Abstract: To tackle the illegitimate employer practice of under-reporting salaries, the conventional deterrence policy approach seeks to increase the penalties and risk of detection. Recently, however, calls have been made for a new more indirect approach that enhances tax morale so as to nurture a culture of self-regulation. The aim of this paper is to evaluate these two policy approaches. Reporting evidence from 6,019 face-to-face interviews conducted in Bulgaria, Croatia and FYR Macedonia in 2015, logit regression analysis reveals no association between salary under-reporting and the perceived level of penalties and risk of detection, but a strong association between salary under-reporting and the level of tax morale. The paper concludes by discussing the implications of the findings for theory and policy.

Keywords: envelope wages; tax morale; informal economy; Southeast Europe (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:jes:journl:y:2017:v:8:p:5-28