Tackling the Undeclared Economy in Bulgaria: A Baseline Report

Type Working Paper
Title Tackling the Undeclared Economy in Bulgaria: A Baseline Report
Publication (Day/Month/Year) 2014
URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2430876
This report provides a systematic review of available evidence on the extent and nature of the undeclared economy in Bulgaria, as well as on the institutional actors involved in tackling the phenomenon and their policy approach and measures used.

Extent of the undeclared economy - Bulgaria is increasingly included in international and European studies of the size and nature of the undeclared economy, allowing cross-national comparisons. Schneider (2013) estimates the undeclared economy in Bulgaria to be 31% of GDP in 2013, which is the highest estimated value in the EU-28. According to the World Bank Enterprise Survey 2009, 54% of firms assert that they compete against firms operating in the undeclared economy and for 28% of firms the practices of undeclared sector competitors represent a major constraint. This is high compared with other EU-27 member states.

Recent surveys indicate that although the undeclared economy appears to be shrinking over time, there is an increasing involvement in some types of undeclared work due to the economic crisis. This means that although the overall trend is downwards, not all forms of undeclared work are shrinking.

Nature and types of undeclared work - Examining sectorial and business variations, there is greater involvement in the undeclared economy amongst small and medium-size enterprises, and those operating in construction, retail, tourism, hotels and restaurants, real estate, garments, food processing and the agricultural sectors as well as some services. Overall, labour-intensive, low technology sectors are more vulnerable to entering the undeclared realm. Producers and distributors of excise goods (alcohol, cigarettes and fuel) are considered at high risk when it comes to tax/excise evasion and under-reported turnover.

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