The robust growth in household debt in pre-crisis period coincided with real growth in household disposable income, large economic expansion and a considerable fall in banks’ interest rates. However, household debt indicators deteriorated markedly as total household debt grew faster than income. This raised concerns about potential implications of an additional increase in the debt burden on financial stability. An analysis of household debt based exclusively on data aggregated at the sector level is not a best financial vulnerability indicator as it fails to provide insight into the distribution of debt and credit risk by individual household groups. The text explains the problems with personal over-indebtedness in Croatia and measures for their reduction.
The term “not directly observed” or “the underground economy” refers to those economic activities that should be included in the GDP estimation but which are not recorded in the statistics business surveys or tax and administrative data used in the calculation of the estimates of national accounts because they are not directly observable. The unofficial or informal economy contains that part of the economic activity that is difficult to measure. Thus, in addition to the complex issue of defining the underground production, there is an even more demanding task of measuring it. Hitherto in the literature, various estimation methods of unofficial economy have been proposed and their results differ significantly. The goal of this article is to provide an overview of the various methods of its measurement. The unobserved economy poses estimation problems of economic aggregates that can be differentiated as the total lack of information and the distortion of available information. There is no universal optimal approach applicable to all countries or even to the same country at different periods. In the attempt to limit the underground economy, it is much better to obviate the causes than penalise the consequences. It is necessary to simplify the procedures enabling citizens to formalize their undeclared activities, to provide a tax system that is as stable as possible and a tax and regulatory burden that is as low as possible. What is crucial is the improvement of institutions, professionalization of civil service and removal of the huge impact of politics in the societies.
The undeclared work is a complex and multifaceted phenomenon that has been present in all countries, regardless of its social and political establishment. Notwithstanding, the empirical evidence suggests that informal economy is more prevalent in countries with lower levels of GDP. Furthermore, the informal economy is present in sectors with lower level of capital and higher level of labour intensity. Therefore, the theory and everyday experience imply that the informal economy is more widespread among the services than the goods sectors. This paper provides an overview on the informal work and unofficial economy in the services sector in the former socialist countries in South East Europe. For the reduction of undeclared activities, it is necessary to simplify the procedures for establishing small businesses, to stabilize the tax system, to ensure high tax morale and trust in society and towards institutions, and to decrease the state regulatory burden.
Background: A lower tax morality leads to an increased readiness to become active in the unofficial economy and causes the lack of public revenues.
Objectives: The aim of this paper is to investigate determinants that shape tax morale of Croatian citizens.
Methods/Approach: An ordered logit model is employed to evaluate which determinants shape tax morale of Croatian citizens. Data for the research were collected from 2,000 face-to-face interviews conducted in Croatia in late 2015.
Results: The descriptive analysis illustrates that 52 percent of respondents reported a high level of tax morale, 26 percent of respondents have a low tax morale, while 8 and 14 percent have a mid-low and a mid-high tax morale, respectively. The ordered logit analysis revealed that gender, age, financial situation, region, and participation in the unofficial economy have an impact on the tax morale.
Conclusions: Besides socio-demographic, socio-economic, and spatial determinants, a great number of sanctions for participation in informal activities also shapes tax morale of the Croatian citizens. More precisely, marginal effects show that those perceiving the expected sanctions as “normal tax or social security contributions due, plus a fine or a prison sentence” have by 6.3 percentage points higher probability of reporting the highest tax morale than others.