Reducing Undeclared Employment in Hungary : Synthesis Report of The World Bank Study

Abstract

Undeclared work and incomes are a serious concern for the Government of Hungary, primarily because of the negative consequences for the country's already difficult fiscal situation. The Government has already introduced a number of reforms intended to reduce undeclared economic activity. Much of the effort to this point has focused on strengthening the "stick" through enforcement and sanctions. A successful strategy to combat the undeclared economy also requires more effective "carrots" that improve the incentives to operate in the formal sector. The most important measures will involve reforms to lighten the tax burden, especially on labor. Public information and education is the final element in a strategy to move Hungary to the "tipping point" in the struggle against the undeclared economy.