Analytics, Estonia, Financial Services, Legislation, Markets and Companies, Shadow economy, Wages

The Institute's director Marje Josing said in her report that the causes for reduction in the payment of "envelope wages", i.e. wages which are not declared and thus on which no taxes are paid, are the employees registry set up by the Tax and Customs Board, increase of employees' awareness and decrease of the unemployment rate. "The influence and share of shadow economy in the Estonian economy has been steadily declining, an increasing number of entrepreneurs and employees consider it important to work based on official contracts and honest payment of taxes," said Josing.

Head of Information Department of the Tax and Customs Board Tõnis Kuuse said that companies have done a great job, joining the changes in registration of working. "According to last year's it income tax declarations, 20,000 persons had an official income for the first time," said Kuuse.

At the same time, he admitted that a big problem is payment of partially undeclared wages.

Illegal wages accounted for 33% of the income of people who received envelope wages last year. In 2013, the figure was 39%. However, only 11% of envelope wage recipients worked only for unreported wages.

Envelope wages are most common in the construction sector, where 31% of all envelope wage recipients had received envelope wages. Catering and transport sector followed with 16%.

47% of the recipients of envelope wages are satisfied with the manner in which they get paid. 29% of the people working unofficially were not satisfied with their situation, but about half of them admitted that if they did not agree to envelope wages, then they would lose their job.

71% of Estonian population does not support payment of envelope wages. The share has been between 77 and 71% in the past four years. 22% of people had no opinion on the issue and 7% supported it in 2014.