The first and main goal of project is to find how much does the budget of the government of Kosovo lose and how much pension contributions are forgone as a result of labor informality. Secondary goals of the project to find out the challenges of fighting labor informality and implications that arise from undeclared labor.
Losses from the government budget were calculated by using three different approaches. First approach takes into consideration the total number of workers that is generated by the Labor Force Survey and the total number of declared workers at the Kosovo Saving Pensions Fund. It was found that Kosovo budget loses between 2 and 4.6 million euros annually, while pension contributions forgone as a result of labor informality are between 11 and 18.3 million euros annually.
The second approach also refers to the total number of active workers that was found by the Labor Force Survey. The total number of undeclared workers is found based on the labor informality percentage that was found by the Riinvest report “To Pay or Not To Pay”. Calculations from this approach yielded that Kosovo government budget losses between 4.2 and 9.4 million euros in unpaid taxes. While the pension contributions forgone as a result of labor informality are between 22.5 million euros and 37.5 million euros annually.
Lastly, the third approach uses information on inspections from the Executive Agency of Labor Inspectorate. This approach compares the total number of inspected workers with the number of workers who were legalized. It was found that, using this approach, the Kosovo government budget loses between 1 and 2.3 million euros annually in unpaid taxes. While pension contributions forgone as a result of labor informality are between 5.4 and 9.1 million euros annually.
The study finds that main challenges of fighting labor informality are poor business planning, lack of collaboration between relevant institutions, and lack of capacities in the side of the Executive Agency of Labor Inspectorate.
Zagragja, Lumbardh, "Fighting Informal Economy: Informal Labor" (2015). Thesis. Rochester Institute of Technology. Accessed from
RIT/A.U.K - formerly American University in Kosovo