The Belgians, champions of ‘working on the black economy’
6/21/12

Commissioned by theBelgian Federal Administration of Social Security and Science Policy, this research is the result of joint work carried out by the Katholiek Universiteit Leuven, the Université Libre de Bruxelles and the Université de Liège, and for the latter more specifically the CREPP (Center of Research in Public Economics and Population Economics), with Sergio Perelman and Jérôme Schoenmaeckers. The study was not restricted to undeclared work and fraud concerning compulsory social tax contributions, but also covers social security fraud and every possible form of social fraud. Its aim is to inform the political authorities of the scale of the fraud and to frame recommendations with a view to improving the battle against the different types of fraud.

The majority of European countries are today endeavouring to straighten out their public finances by re-establishing a better balance between revenues and expenditure. Consolidating or improving the former, containing or reducing the latter: in general it is in acting on the two dimensions of their budgets that they are looking to reduce the deficits which have deepened over the recent years. That is true for Belgium, as it is for many other European Union (EU) countries. Even if our economic situation is less worrying than that of Greece or other countries in the Mediterranean basin, we have a particular reason to not let our public finances worsen even more: the very high levels of our debt. With a public debt which is bordering on 100% of the Gross Domestic Product (GDP, in other words the total wealth produced by the country in a year), Belgium is, in effect, the third most indebted country in Europe, after Greece and Italy.

If the governing powers want to seriously tackle the recovery of their finances, they have an interest in neglecting no pathway which might help them to do so. They must also therefore fight more effectively against fiscal and social fraud. These phenomena in effect lead them to incur heavy revenue losses, because the taxpayers do not pay all the taxes which they are liable for (fiscal fraud) and because business companies or individual citizens duck the payments they should contribute towards social security (social fraud). Social fraud unjustifiably increases public expenditure when individuals receive social security payments (unemployment benefit, invalidity, etc.) to which they are not entitled. Belgium is moreover committed to an increased attempt to fight against these types of fraud.

COVER-Travail-au-noirBut in order to fight effectively against fiscal and social fraud, it is necessary to know its scope, the forms it takes, its causes and the motivations behind it. Measuring the scale of these phenomena, which are classically known by the term ‘the underground economy,’ is not easy because by definition they involve matters which people wish to hide from the authorities.

In this new publication, the researchers publish the results of an investigation carried out in the Summer of 2010 on non declared activities carried out by the Belgians, as well as their opinions and their motivations. This research was commissioned and funded by the Belgian Federal Administration of Social Security and Science Policy. It is the result of joint work carried out by the Katholiek Universiteit Leuven, the Université Libre de Bruxelles and the Université de Liège, and more precisely the CREPP (Center of Research in Public Economics and Population Economics), with Sergio Perelman and Jérôme Schoenmaeckers. The scope, the method and the substance of the survey were carefully prepared. But for a number of reasons, notably budgetary ones, its deployment on a large scale could not unfortunately be carried out as planned. Instead of carrying out an investigation which was representative of the whole of the population, it was necessary to reduce the scope and limit its reach to a viable ‘pilot study’, which was to enable the methodology for a complete investigation, on a large scale, to be developed.

[1] Jozef Pacolet, Sergio Perelman, Frederic De Wispelaere, Jérôme Schoenmaekers, Laurent Nisen, Ermano Fegatilli, Estelle Krzeslo, Marianne De Troyer, Sigrid Merckx, Social and fiscal fraud in Belgium. A pilot study on declared and undeclared income and works: SUBLEC, Acco, Leuven, 2012.

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