Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey

SUBLEC International workshop on A survey instrument for revealing social and Fiscal Fraud Brussels, 25 February 2008, Federal Public Service Social Security HIVA Catholic University of Leuven - CREPP University of Liège - Centre de sociologie du Travail, de l’Emploi et de la formation, University of Brussels Federal Public Service Social Security and Federal Science Policy Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey Jozef Pacolet & Sigrid Merckx HIVA Higher Institute of Labour Studies, Catholic University of Leuven

1. Content • Some overview of 24 recent studies using surveys • Conclusions on design and results • Some Belgian experience • Relevance for measuring undeclared work, underground economy • Conclusions for planned research in Belgium

2. Overview and title

3. Definition • Broad definitions: undeclared work, underground economy, social and fiscal fraud, illegal activities, evasion • Multidimensional phenomena, • Many institutions involved (social security, employment, fiscal) • Need for exhaustiveness remains • Need for a balanced policy making and policy debate for fair and efficient taxation and fight against fraud

4. Aim, Use and usability • Reason: research interest, policy making interest, controllers interest • Describing and understanding forms and causes of undeclared activities • Measuring size and structure • Targeting audits and improve fight against undeclared work • Modelling fraud detection and data mining • Opinion and value research …is of relevance for policy making and rising awareness of the fight against undeclared work • Could be organised as action research (again marketing campaigns - might be the role of information and clearing house on undeclared work - cfr. Policies on drugs and alcohol misuse) • Relevance of comparability with administrative and macro-economic information

5.1 Topics • On informal economy • Undeclared work (main interest of Eurobarometer?) • Benefit fraud • Fiscal fraud : undeclared income and or high/false tax deductions • Labour income, other income, VAT, estate taxes, transfer taxes • Some include also avoidance (distinction between evasion and avoidance sometimes difficult, sometime substitutes) • Detailed or not: some surveys included categories of fraud, non respect of certain types of regulation (make them sector, country specific)

5.2 Dimensions/ determinants of fraud Tax morale, culture Cost: audit probability, Punishment, penalty rate Benefit:tax and contributions Level; red tape

5.3 Target group • Households • Firms • Benefit earners • Sampling: self selected, random, proportional, over weighting categories at risk

5.4 Part of undeclared work with population based survey Source: A. Riedmann, Eurobarometer pilot survey,13 December 2007

5.5 Target group • Trade off between same as Eurobarometer and larger sample • Versus broadened scope: looking for exhaustiveness • Limit to supply and or demand • Overweigting certain categories, industries

6. Methodologies • Focus groups • Qualitative opinion research and on facts and figures • Random route method • Population based

7. Mode • Experimental • Face to face • Post • Telephone • Internet low cost • Mixed mode (internet, post, telephone) • Using randomized response techniques • Direct or indirect, open or covert: clear difference in self reported fraud

8. Who is doing the survey • Research institutes and universities • Statistical offices • Marketing institutes • Included in omnibus or other ongoing regular surveys

9. Results: rensponse, size, explanation, problems • Problems of non-participation, item-non respons, underreporting and underestimation, socially desirable answers • Share of population using or supplying undeclared work: • Volume in hours, additional information on black wages • Translated in volume of undeclared work as share of GDP: lower bound estimates

10.1. Some illustration of the difference in definition and the need of reconciliation

11.1 Belgium • Long tradition of scientific interest in social and fiscal fraud • Mixed use during this period of as well administrative information, national accounts, macro-economic estimates and surveys • Remarkable persistence of methods and estimates (or accepted estimate of undeclared work)

11.2. Belgium : five examples of (using) surveys • -Pestieau on informal activities, announced as ‘activities others than (formal) work’ • -Geeroms (1984) on tax evasion and avoidance, announce as survey on government, government spending and paying taxes • -Ver Heyen, Tratsaert, Van Gyes, De Witte (2002) on benefit fraud in unemployment insurance, announced as survey on role of government and justice • -Pacolet, Baeyens, 2007, business survey on social fraud announced as study on unfair competition • -Perelman used household budget survey to estimate possible undeclared work for self-employed: so

12. Some conclusions • Several target groups thinkable: how to be as exhaustive as possible • Social and fiscal fraud taken together, even avoidance, and benefit fraud • Leave out other criminal activities as well as informal work for own use • Should include tax morale, cost and benefits of fraud • Why not label it as a research on the cost and benefits of paying taxes and the welfare state • Household, household and independent worker or firm oriented • Contradiction between explicit commissioned surveys on fraud and the need to make it covert, disguised • Now concentrated on households including independent workers, free professions • Implicitly benefit earners included • Need to include other groups at risk (as illegal migrants) • Potential for other business surveys and surveys within the inspectorates • Additional source of information beyond macro-economic, national accountants and administrative information

Surveys on social and fiscal fraud: state of the art and lessons for the Belgium Survey