Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey

Jozef Pacolet, Sigrid Merckx Higher Institute of Labour Studies, Catholic University of LeuvenSurveys on social and fiscal fraud: state of the art and relevance for Belgium

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SUBLEC International Workshop on a survey instrument for revealing social and fiscal fraud Brussels 25 February 2008

Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey

Jozef Pacolet & Sigrid MerckxHIVA Higher Institute of Labour Studies,

Catholic University of Leuven

SUBLEC International workshop on A survey instrument for revealing social and Fiscal FraudBrussels, 25 February 2008, Federal Public Service Social Security

HIVA Catholic University of Leuven - CREPP University of Liège - Centre de sociologie du Travail, de l’Emploi et de la formation, University of Brussels

Federal Public Service Social Security and Federal Science Policy


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Some overview of 24 recent studies using surveysConclusions on design and resultsSome Belgian experienceRelevance for measuring undeclared work,

underground economyConclusions for planned research in Belgium

1. Content


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2. Overview and titleYear Country Title Authors

1 1980-1994

Denmark Mogensen V./Pedersen S.

2 1981 Norway Survey on the hidden labour market in Norway

Isachsen and Strøm

3 1981-1982

Sweden Laurin

4 1982-1984

Sweden Wahlund

5 1984 Belgium Enquete sur les activités effectuées en dehors du travail

Pestieau

6 1984 Germany Wolff

7 1985 Spain Ministery of Economic Affairs

8 1986-1987

The Netherlands

‘Working in the Netherlands’ Koopmans

9 1988 Belgium Attitude towards the policy of the government, the government’s spending and paying of taxes

Geeroms H.

10 1990 Norway Goldstein

11 1997 Germany Lamnek S., Olbrich G. & Schäfer W.J.

12 1997/1998

Sweden Pedersen S.

13 1998 Sweden Riksskatteverket


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2. Overview and title14 1999 Belgium Perception of the behaviour of

the government and the justice of the unemployment benefit

Tratsaert K. & De Witte H.

15 2000 Czech and Slovak Republic

Hanousek J. & Palda F

16 2000 Great Britain Pedersen S.

17 2001 Denmark Pedersen S.

18 2001 Germany Pedersen S.

09 1998/2002

Norway Pedersen S.

20 2002 Estonia Working Life Barometer in the Baltic Countries 2002:

Antila J. and Ylöstalo P:

21 2002 Latvia Working Life Barometer in the Baltic Countries 2002


22 2002 Lithuania Working Life Barometer in the Baltic Countries 2002


23 2005 Swedish Tax Agency

24 2007 Belgium Eurobarometer: Undeclared work in the European Union

Europese Commissie


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3. Definition

Broad definitions: undeclared work, underground economy, social and fiscal fraud, illegal activities, evasion Multidimensional phenomena, Many institutions involved (social security,

employment, fiscal)Need for exhaustiveness remains Need for a balanced policy making and policy

debate for fair and efficient taxation and fight against fraud


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Reason: research interest, policy making interest, controllers interest Describing and understanding forms and causes of undeclared

activitiesMeasuring size and structureTargeting audits and improve fight against undeclared workModelling fraud detection and data miningOpinion and value research …is of relevance for policy

making and rising awareness of the fight against undeclared workCould be organised as action research (again marketing

campaigns - might be the role of information and clearing house on undeclared work - cfr. Policies on drugs and alcohol misuse)Relevance of comparability with administrative and macro-

economic information

4. Aim, Use and usability


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On informal economyUndeclared work (main interest of

Eurobarometer?)Benefit fraudFiscal fraud : undeclared income and or high/false tax deductionsLabour income, other income, VAT, estate taxes,

transfer taxesSome include also avoidance (distinction between

evasion and avoidance sometimes difficult, sometime substitutes)Detailed or not: some surveys included categories

of fraud, non respect of certain types of regulation (make them sector, country specific)

5.1 Topics


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5.2 Dimensions/ determinants of fraud

Tax morale, culture

Benefit:tax and contributions Level; red tape

Cost: audit probability, Punishment, penalty rate


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5.3 Target groupHouseholdsFirmsBenefit earnersSampling: self selected, random, proportional,

over weighting categories at risk


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5.4 Part of undeclared work with population based survey

Type undeclared work

Individual demand

Firm

Demand

Individual (supplier)

Covered from demand and supply side

Covered from demand size

Firm (supplier) Covered from demand size

Not covered

Source: A. Riedmann, Eurobarometer pilot survey,13 December 2007


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5.5 Target groupTrade off between same as Eurobarometer and

larger sampleVersus broadened scope: looking for

exhaustivenessLimit to supply and or demandOverweigting certain categories, industries


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Focus groupsQualitative opinion research and on facts and

figuresRandom route methodPopulation based

6. Methodologies


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ExperimentalFace to facePostTelephoneInternet low costMixed mode (internet, post, telephone) Using randomized response techniquesDirect or indirect, open or covert: clear difference

in self reported fraud

7. Mode


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Research institutes and universitiesStatistical officesMarketing institutesIncluded in omnibus or other ongoing regular

surveys

8. Who is doing the survey


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Problems of non-participation, item-non respons, underreporting and underestimation, socially desirable answersShare of population using or supplying

undeclared work:Volume in hours, additional information on black

wages Translated in volume of undeclared work as share

of GDP: lower bound estimates

9. Results: rensponse, size, explanation, problems


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10.1. Some illustration of the difference in definition and the need of reconciliation

Percentage of persons who are 'self declaring' that their doing undeclared work

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


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Average hours of those doing undeclared work per year

0

100

200

300

400

500

600

700



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Average hours of those doing undeclared work as % of normal paid working hours

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

40,00



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Undeclared work of total potential work volume of population15+

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

LV BG

LT HU

EE PL IT

EL NL

DK SK

CZ RO

IE

FR

EU27 PT

BE LU

ES

AT SE

MT

SI D-W

DE

CY FI

UK D-E



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Total % of envelope wages

0

2

4

6

8

10

12

14

16

18

RO

LV

BG

P

L L

T IT

E

E

EU27

HU

SK

PT

SI

ES

BE

AT

EL

D-E

F

R IE

CY

CZ

NL

F

I D

E S

E

MT

DK

LU

D-W

U

K



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Undeclared work of total work volume and total % of envelope wages

0,02,04,06,08,0

10,012,014,016,018,0

RO LV

BG

PL LT

IT EE

HU

EU27 SK

PT EL SI

BE ES

AT NL

FR IE

CZ

DK D-E

SE

LU M

T CY

DE FI

D-W UK



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'Self declared" undeclared work Eurobarometer compared to non-observed economy as % of GDP

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

20,00

LV BG LT HU EE PL IT NL CZ RO IE BE ES AT SE

Eurobarometer

UNECE



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Long tradition of scientific interest in social and fiscal fraud Mixed use during this period of as well

administrative information, national accounts, macro-economic estimates and surveysRemarkable persistence of methods and estimates

(or accepted estimate of undeclared work)

11.1 Belgium


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-Pestieau on informal activities, announced as ‘activities others than (formal) work’-Geeroms (1984) on tax evasion and avoidance, announce as survey on government, government spending and paying taxes-Ver Heyen, Tratsaert, Van Gyes, De Witte (2002) on benefit fraud in unemployment insurance, announced as survey on role of government and justice-Pacolet, Baeyens, 2007, business survey on social fraud announced as study on unfair competition-Perelman used household budget survey to estimate possible undeclared work for self-employed: so

11.2. Belgium : five examples of (using) surveys


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12. Some conclusions

Several target groups thinkable: how to be as exhaustive as possible Social and fiscal fraud taken together, even avoidance, and benefit fraud Leave out other criminal activities as well as informal work for own use Should include tax morale, cost and benefits of fraudWhy not label it as a research on the cost and benefits of paying taxes

and the welfare stateHousehold, household and independent worker or firm orientedContradiction between explicit commissioned surveys on fraud and the

need to make it covert, disguisedNow concentrated on households including independent workers, free

professionsImplicitly benefit earners includedNeed to include other groups at risk (as illegal migrants)Potential for other business surveys and surveys within the

inspectoratesAdditional source of information beyond macro-economic, national

accountants and administrative information

Documents

Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey