Tackling the Propensity towards Undeclared Work: Some Policy Lessons from Croatia

What is it about?

The aim of this paper is to evaluate contrasting policy approaches towards undeclared work.

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Why is it important?

Logistic regression analysis reveals no association between participation in undeclared work and the perceived level of penalties and risk of detection, but a strong association between participation in undeclared work and the level of tax morality. It thus confirms recent calls for the conventional direct controls approach, which seeks to deter engagement in undeclared work by increasing the penalties and risk of detection, to be replaced by an indirect controls approach which seeks to improve tax morality so as to encourage greater self-regulation and a culture of commitment to compliance.

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