Russia seeks ways to reduce grey pay

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/28

​Facing budgetary shortfalls, the government is trying to increase revenues also by improving tax collection. Finance minister Siluanov has noted that grey wages cause a huge loss of tax revenue, perhaps as much as 1.5–2 trillion rubles (2 % of GDP) a year. The finance ministry and tax administration are now considering ways to get a handle on undeclared income, including reviews of financial sources of large household purchases such as real estate. Earlier a limit to cash transactions was also proposed, but that seems to be dropped. Russia’s 13 % flat income tax applies to wages and most other forms of household income.

Some 15 to 30 million Russians (20–40 % of employed persons) are estimated to work in the grey economy. Rosstat estimates that 13–14 million people work solely and another 1-2 million partly in the unofficial sector. Corresponding estimates of Russia’s Presidential Academy of National Economy are 9 and 20 million. Surveys of the Academy of National Economy and VTSIOM found that in recent years about 10–15 % of workers received all of their wages under the table, while about 15–20 % has a portion of their wages paid under the table. Half of Russians said they had paid for services or work under the table.   

Rosstat GDP figures include an estimate of the grey economy i.e. legal, but unrecorded, economic activity. The estimate does not include criminal activity such as trafficking in illegal drugs. In the first part of 2000s, Rosstat estimated that Russia’s grey economy accounted for 20–25 % of GDP and that in recent years that share has declined to around 15 % of GDP. Statistics Finland’s estimate for Finland is 1–2 %.

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