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Explaining and Tackling Under-Declared Employment in FYR Macedonia: The Employers Perspective

Colin Williams () and Slavko Bezeredi

South East European Journal of Economics and Business, 2018, vol. 13, issue 2, 19-31

Abstract: The aim of this paper is to evaluate how employers who illegally under-report their employees’ salaries to evade paying the full tax and social contributions owed can be explained and tackled. These employers have been conventionally explained as rational economic actors doing so when the benefits outweigh the costs, and thus the solution is to increase the sanctions and/or probability of detection. An alternative social actor approach, however, explains employers as under-reporting salaries because of their lack of both vertical trust (i.e., their beliefs are not in symmetry with the laws and regulations) and horizontal trust (i.e., they believe many others are non-compliant). Reporting a 2015 survey of 450 employers in FYR Macedonia, the finding is that there is no strong association between employers under-reporting salaries and their perceived level of penalties and risks of detection, but a strong significant association with both their level of vertical and horizontal trust. The theoretical and policy implications are then discussed.

Keywords: envelope wages; informal economy; tax evasion; FYR Macedonia (search for similar items in EconPapers)
Date: 2018
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South East European Journal of Economics and Business is currently edited by Adnan Efendic, Vesna Babić-Hodović and Aziz Šunje

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