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

Janek Leis, head of the information department at the Tax and Customs Board, said that it is positive that the share of those earners, who do not support envelope wages, has increased. Compared to the previous study, the share of those who do not support it increased from 62% to 70%.

"The study supports the assessment based on the control activity of the Tax and Customs Board that the amount of people receiving fully illegal salaries is decreasing, but the number of people receiving partial envelope wages has increased," Leis said.

Results indicate that pressure for the payment of envelope wages has come foremost from employers, which can be interpreted with strong wage pressure. "Even though there are more people who partially receive envelope wages, it is nevertheless positive that the sums received illegally have become smaller. Therefore, envelope wages are being paid in smaller sums and a larger share of income is earned honestly," Leis said.

The consumption of illegal alcohol has remained on the same level, but the number of people who occasionally consume illicit cigarettes has increased.

According to the study, 5% of residents consciously consumed illegal alcoholic beverages. In 2016, altogether 3% of alcohol consumers consumed illicit alcohol knowingly. "The consumption of illicit alcohol continues to be rather unpopular, but we nevertheless see dangers in the resale of alcohol purchased from Latvia. At the same time, inspectors of the Tax and Customs Board have detected no significant amounts of Latvian alcohol at food and entertainment establishments so far," Leis said.

In 2016, 16% of smokers knowingly purchased illicit cigarettes, while the indicator stood at 26% in 2017. According to Leis, the price difference of illegal and legal cigarettes at the same time decreased, from which it can be concluded that even though the favoring of illicit cigarettes has increased, their availability has worsened. "One of the reasons here is definitely also the successful monitoring activity of the Tax and Customs Board and the increased detection capacity thanks to the addition of x-ray equipment," Leis said.

The shadow economy study is based on the results of an survey carried out among the adult population at the end of 2017, with 1,074 people between the ages of 18 and 74 responding to it. The Estonian Institute of Economic Research has been carrying out studies concerning the consumption of illegal alcohol and cigarettes and the payment of envelope wages since 1998.