Analysis of undeclared work: the Lithuanian case

Abstract

Undeclared work is a structural part of the shadow economy. In literature, undeclared work is generally analysed by macro methods to estimate disparities between costs incurred from declared work and income derived from work. On the basis of such studies, the undeclared work structure (groups of economic operators, phenomena of undeclared work) cannot be estimated. The article presents an analysis of estimation methods applicable to the undeclared work and income derived from such work as well as practical application aspects particular to those methods. The author proposes to investigate the phenomena of undeclared work and measure the effects they have on the national consolidated budget, i.e. the amount of tax losses (the tax gap). The article provides the principal methodical layout and the method for quantification of the dimension of undeclared work. The article also offers the results of undeclared work, the dimension of the income derived from such work, and the tax gap in Lithuania.