Complex Research on Undeclared Work: Theoretical Aspects and Empirical Application in Lithuania


  • Jolita Krumplyte Vilnius Gediminas Technical University
  • Jurgis Samulevicius Vilnius Gediminas Technical University


undeclared work, informal employment, hidden unemployment, shadow economy, tax evasion, tax avoidance.


Relevance of undeclared work as a scientific issuebecomes evident through the fact that this phenomenon isinsufficiently investigated (no single concept is agreedupon), besides, it is difficult to estimate its extent inquantitative terms. The extent of undeclared work is notreflected in official statistics, thus measurement of changein the officially registered level of unemployment mightproduce the image of unemployment as an economic andsocial issue, which fails to represent reality.The article addresses the issue pertaining toambiguous treatment of the concept “undeclared work” inscientific and special researches, analyses cases when theconcept is treated as identical to other employment andunemployment ideas, and explores quantitative assessmentaspects of undeclared work.Scientific literature and applied research uses differentterminology while describing undeclared work (namely,undeclared work, illegal work and hidden unemployment)and provides various definitions. The chosen concept ofundeclared work (as a structural part of shadow economy)depends on objectives of a research as well as the conceptof shadow economy.In this article, the concept of the “shadow economy”contains economic activities undertaken in spite oflegislative requirements and restrictions even though suchactivities are subject to rigorous regulation and control(Krumplyte 2008, 2009a, 2009b, 2009c, 2010). In thisresearch, undeclared work is considered in the context oftax non-compliance, disassociating from economic activitiesattributable to unregulated economy (self-employed naturalpersons, legally not required to register their activity andpay taxes) as well as criminal activities. This article definesthe undeclared work as an economic activity (comprisinglabour relations in enterprises as well as self-employed),which is carried out in violation of legislative requirementswith the purpose of tax non-compliance.Phenomena of undeclared work may be classified intotax avoidance and tax evasion categories. Tax avoidance isperceived as reduction or nonpayment of payable taxes inthe form of reduction or elimination of tax base of acertain tax with the help of artificially created businessschemes or sequences of transactions Tax evasion isattributed to the group of the most serious offences, i.e. taxnon-compliance in the form of concealed economic activity(Krumplyte, 2009b, 2009c). Under the given context, aclassification of undeclared work phenomena in Lithuaniawas designed in the course of the empiric research.Evaluating the trends of undeclared work in a complexmanner, the authors suggest identifying indicatorspertaining to distribution of each phenomenon and theextent of formally undocumented income. The distributionindicator of a phenomenon indicates a portion of economicoperators who were involved in a certain economic activityand participated in shadow economy. The indicatorshowing the extent of officially undocumented incomeindicates the portion of income within a certain type oftotal income per one economic operator, not included intoofficial accounting documents.The article offers the results of the empiric research(delivered following the peer review method) ondistribution of undeclared work phenomena in Lithuaniaand trends (of the periods 2006-2008 and 2009-2011)pertaining to the extent of undeclared income (employmentincome and earnings received from self-employment).

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