Every fourth company in Serbia engaged in shadow economy

The shadow economy in Serbia is in decline. In the past five years, the volume of illegal business has decreased from 14.9 to 11.7% of the GDP.

Companies in Serbia generate annually close to 6.5 billion euros thanks to having undocumented workers, paying part of their salaries in cash and hiding their real profit.  That is why additional measures, like the adoption of the new Programme for the Suppression of the Shadow Economy, are necessary for solving one of the biggest economic challenges.

“Estimates are that every fourth company is involved in the shadow economy, while five years ago it was every third. The hiring of illegal workers and the payment of a part of the salary in cash are still key elements of the shadow economy, and out of 100 dinars that companies earn in the shadow zone, 64 are generated in this way, and 36 dinars from not declaring profits”, said professor of the Faculty of Economics, Gorana Krstić, at the presentation of the “Shadow Economy in Serbia 2022” study, which she conducted with Professor Branko Radulović of the Faculty of Law.

Construction is the economic branch that is most susceptible to being involved in the shadow economy, where every fifth company doesn’t operate fully legally. Agriculture is in second place, where as many as 13% of all workers are undocumented, although, in the past five years, the number of workers in the shadow economy has decreased by 200,000 which is proof that the shadow economy has been declining.

“Companies and entrepreneurs who launched a business no more than three years ago and companies which officially don’t have employees have a greater tendency towards shadow economy-related activities. The probability that companies in financial difficulties will engage in the shadow economy has also significantly increased,” explained Professor Radulović.

One of the methods to reduce the shadow economy is to boost the so-called cashless economy, to reach the average in the countries of Central and Eastern Europe, Serbia could reduce the size of the shadow zone by 3.4% of the GDP, which, in turn, would increase state’s tax revenues by around 700 million euros per year. The study estimates that it would take six to seven years to achieve this.

(Biznis i Finansije, 10.02.2023)


This post is also available in: Italiano

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