CYPRUS has the lowest number of people in the EU who say they have acquired goods or services from the black market economy.
According to the EU’s first-ever survey on undeclared work in member states, the share of those who acquired goods produced on an undeclared basis is on average 6 per cent in the EU27.
“The lowest share is measured in Cyprus, with only one per cent of the population stating that they have acquired goods stemming from undeclared work,” said the report.
Latvia at 17 per cent, and Denmark at 14 per cent, have the highest share.
The phenomenon of ‘undeclared work’ is known under a broad variety of different names – terms such as ‘black work’, ‘informal economy’, ‘shadow economy’, or ‘moonlighting’.
The survey said that only 2 per cent of Cypriots said they had worked in the past 12 months without declaring it, and 35 per cent said they knew somebody who had worked without declaring it.
The survey pointed out that undeclared economic activities were unlawful, creating considerable costs on several levels, such as tax authorities receiving less revenue in the form of income tax or value added taxes, and social security institutions not receiving contributions.
Undeclared activities partly inhibit the creation of regular employment with full social protection, but are also part of the economy, the EU report said.
“This is the first attempt to measure undeclared work on an EU wide basis and in a cross-nationally comparable way using the same methodology, questionnaire concept and definition in all countries,” it said.
“In view of the sensitivity of the subject, the pilot nature of the survey and the low number of respondents who reported having carried out undeclared work or having received ‘envelope wages’, results should be interpreted with great care.”
It says the total share of citizens involved in undeclared work as purchasers – either of goods or services – amounts to 11 per cent of the population.
In Greece, Spain, France, Italy, Cyprus and Luxembourg illegal immigrants are considered to be significantly active in the undeclared labour market. Illegal immigrants tend to find work in agriculture and tourism, two important sectors of those economies.
A senior official at the Finance Ministry agreed that the development of the black market economy in Cyprus had far more to do with illegal foreign workers than with the self employed not declaring their full income.
“We have low tax here so there is not a huge incentive not to declare income,” said the official. He also said the amnesty that was given to the self-employed in the last few years had prompted more self-employed people to declare their income.
“Cyprus is doing relatively well and if we are compared to Greece, we are okay,” said the official, although he did say that with illegal foreign workers, the black market economy was likely to increase on the island. “If it’s now at four per cent, I imagine there will be an upward trend,” the official added.
According to statistics, the undeclared work in 2003 was 4.2 per cent of GDP, which amounted to some £350 million, but the report said this was likely to have risen substantially in the last few years.
Manthos Mavrommatis, the president of the Cyprus Chambers of Commerce and Industry (KEVE), had not seen the survey, but said the cited figures were hard to believe.
“We don’t have a black market economy as big as some Mediterranean countries, but the problem is definitely bigger than that,” he said of the numbers in the report.
Cypriots were among a number of EU citizens who believed that low salaries were a reason for people doing undeclared work. Cypriots were also among those who cited a lack of control by the authorities.
The survey said the three occupational groups most likely to work undeclared were students, the self-employed and the unemployed. In practically all countries, men work undeclared much more frequently than women. As on the regular labour market, women tend to receive lower wages for undeclared work than men.
