The Project consisted of the preparation of a Peer Review Paper within the framework of the Mutual Learning Programme and participation in a conference related to undeclared work (UDW).
The paper provides Croatia’s comments on the policy example of the Peer Review Host Country (Czech Republic) and gives an insight into the situation in Croatia. Whilst the nature of undeclared work varies from one country to the other, depending on the economic, social and political context, some common causes can be identified. UDW represents a significant problem for Croatian economy and is often considered to be a normal part of society and/or a buffer for survival during the economic crisis. If people who receive social-security benefits start to work, they will lose that kind of help, so they are actually encouraged not to work at all or at least not to work legally.
Undeclared work is believed to be attractive for several reasons. First of all, many entrepreneurs in Croatia identify excessive tax burden as one of the main reasons why Croatian economy is less competitive compared to EU Member States. Their opinion is that personal income tax, social security contributions and other employment-related costs are strong motivators for firms not to declare employees in order to avoid taxes and to maintain profit. Furthermore, they find labour legislation too rigid and the cost of employment-related administration too high. Croatian employees do not mind engaging in undeclared employment as they believe that high social security contributions (20% of gross wage and 13% of gross wage for health care insurance) are not proportionate to their future pension and health care insurance costs and benefits. Finally, there is little public trust in the functioning of the state and its institutions.