The government estimates that the scope of the shadow economy in the labor market has drastically decreased, with 74,000 people officially employed in the past three years. Currently, there are 290,000 legally employed individuals who regularly pay contributions.
Budget revenues from contribution collection have increased by 50 percent, according to TVCG’s report.
According to the President of the Employers’ Union (UPCG), Slobodan Mikavica, significant progress has been made, largely thanks to the “Europe Now 1” program, as cash payments, which were common in the past, have mostly been eliminated.
“This part is now in legal circulation. It is also evident that a large number of new workers were employed after the implementation of Europe Now 1, without a corresponding reduction in the number of unemployed people registered with the Employment Agency. This shows that many workers have transitioned from informal to formal employment,” Mikavica said.
There are many forms of the shadow economy, and data shows its share could be as high as 30 percent.
Even in the labor market, many workers prefer not to have formal employment status due to other benefits, such as social assistance or working from home, Mikavica explained.
“Some are receiving income from other companies or institutions where they perform their work, but are still considered part of the labor market, which is not ideal,” Mikavica said.
Illegal activities are also noticeable in the tobacco and cigarette markets, as well as in other sectors like hairdressing, cosmetology, and home-based services.
Seasonal employment in construction also contributes to the informal economy.
Mikavica believes urgent measures are needed to curb the shadow economy in these sectors, as it negatively impacts those operating legally.
“This is unfair competition that significantly affects the market,” Mikavica added.
He also pointed out that unregistered accommodation in tourism contributes to the shadow economy, leading to a loss in budget revenue.
“We have data showing that around 86 million has been lost just from unregistered accommodation. This does not even include the loss from tourist taxes and other indirect revenues,” Mikavica said.
Employers believe that additional measures should be implemented to encourage legal work, and that the Law on Inspection Oversight should be changed as soon as possible.
