Defining and Measuring Undeclared Work

Abstract

Undeclared work as to the definition used subsequently describe income from productive economic activities which are legal and taxable, but on which income tax, social security contributions, VAT, etc., are not paid, because they are not reported to the tax, social security or customs authorities (Feld and Larsen 2005). These activities are not only deliberately concealed from public authorities in order to save taxes, but also to avoid certain legal labor market standards, such as minimum wages, maximum working hours, safety standards, etc., and to avoid certain administrative obligations, such as completing statistical questionnaires or other administrative forms (Feld and Schneider 2010). The prices and wages paid are less than the full market price, and buyer and seller are both aware of this and obtain an extra economic advantage in this way. Only activities which violate the German law against “Schwarzarbeit” are included in the definition. A direct translation of “Schwarzarbeit” is “black work” or “black activities”, but in this report we use the term “undeclared work” for “Schwarzarbeit”.