Shadow economy and undeclared work

In short: The shadow economy encompasses economic activities not officially recorded or taxed. Undeclared work is the best-known form of it in many economies.

In more detail: Estimates of the size of the shadow economy vary widely but make up a significant share of the total economy in some countries.

In detail

• Forms: Unregistered side jobs, untaxed services, and illegal trade all belong to the shadow economy.
• Motivation: Avoiding taxes and social contributions is the most common reason for undeclared work.
• Risks for workers: Those doing undeclared work usually have no health, accident, or pension insurance coverage.
• Consequences for the state: Lost tax revenue weakens the funding of public services such as education and infrastructure.
• Enforcement: Authorities such as customs conduct targeted checks in industries with a high risk of undeclared work, such as construction or hospitality.
• Legal alternatives: Mini-jobs and simplified tax models are meant to create incentives to officially register side activities.
• International differences: The share of the shadow economy in GDP differs greatly between countries with different tax and social systems (bruttoinlandsprodukt-bip, steuern-arten-und-prinzipien).