Taxation | Open Access Articles | Digital Commons Network™

This article reveals how many formal employees in the European Union

receive from their formal employer not only a declared wage but also an undeclared

“envelope wage”. Reporting the results of a 2007 survey involving

26,659 face-to-face interviews, the authors find that one in 18 formal employees

receives an envelope wage from their formal employer, amounting to 25 per cent

of their gross pay on average. Such hybrid wage arrangements are ubiquitous,

but are more common in some countries, employee categories and types of firm

than others. The authors conclude by discussing the theoretical and policy implications

of these findings.

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