Russia's shadow economy

Shadow economy

Main article: Shadow economy

2024: Russia's informal economy breaks eight-year record for employment

On December 4, 2024, it became known that the number of people employed in the informal sector of the Russian economy reached 15.8 million people in the third quarter of 2024, which is 21.3% of the total employment of the population. This figure was the highest since 2016, when 16.3 million people worked in the informal sector.

According to reports, the RBC growth of informal employment for the year amounted to 11.7%, an increase of 1.66 million people compared to the third quarter of 2023. According to the data, Rosstat the largest number of informally employed people is traditionally concentrated in the areas of trade and auto repair - 3.9 million people.

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Фото: Freepik

Professor of the Financial University under the Government Alexander Safonov connects the growth of informal employment with the economic situation and high inflation, when employers are looking for ways to optimize labor costs.

According to the Federal Tax Service, by the end of October 2024, the number of self-employed in Russia reached 11.7 million people, which is 33% more than in 2023. Among the popular areas of their activity are taxi services, marketing, advertising, construction and beauty.

Yaroslav Kuzminov, scientific director of the Higher School of Economics National Research University, noted that the development of digital platforms allowed hundreds of thousands of citizens to receive additional income through self-employment or work in small businesses, providing an increase of 20-30% to their main earnings.

According to the publication, regional statistics show the largest increase in informal employment in Moscow - an increase of 156% to 1.11 million people, St. Petersburg - by 44% to 339 thousand people, and Sevastopol - by 45%. Leading researcher at IPEI RANEPA Viktor Lyashok connects this dynamics with a change in the structure of the labor market in megacities.^[1]

2023

Rostrud counted 795 thousand illegal workers

Rostrud counted 795 thousand illegal workers at the end of 2023. The department released such data in early October 2024.

We are talking about any violations in employment. This is work without an employment contract or without a license in the service sector, and the payment of salaries "in an envelope," and unofficial part-time work. More than half of those who were found concluded employment contracts. The rest issued, SP became self-employed or switched to work under civil law contracts.

The volume of the Russian market for illegal products reached 5 trillion rubles

In 2023, the volume of illegal goods in the Russian retail market amounted to 4.9 trillion rubles, or 10.1% of the entire retail market. This figure is five times higher than the global average. This was reported in a study by RBC, published in early June 2024.

According to the report, the share of illegal products in Russia over the past four years has grown by 58% in current prices - from 3.1 trillion rubles in 2020 to almost 5 trillion rubles in 2023. The reasons for this growth were Western sanctions, the legalization of parallel imports, rising inflation, a moratorium on business inspections and the development of Internet marketplaces.

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Фото: Unsplash

Illegal products have low quality and can be unsafe for health, especially when it comes to medicines, children's products, food, alcohol and tobacco. In addition, illegal products not only deprive the economy of taxes and interfere with healthy competition, but are often unsafe for consumers, analysts warn. RBC

The industries most affected by illegal trafficking were the fashion industry, cosmetics, perfumes, tobacco and nicotine-containing products, where the share of counterfeit goods reaches 17%.

RBC stressed that in monetary terms the main blow falls on the tobacco industry: budget losses from lost excise taxes are estimated at 123.7 billion rubles. In addition, due to illegal turnover, the federal budget received less than 976.9 billion rubles in value added tax (about 13.6% of total VAT revenues).

According to the survey, 36% of Russians have encountered illegal products in recent years. The main channels of its sales are markets and fairs (54%), marketplaces (36.9%) and online stores (32.2%).^[2]

2022: The share of unofficial income in Russia over 9 years decreased from 37% to 10%

The share of unofficial income in Russia over 9 years decreased from 37% to 10%. This is stated in a study published in the journal Rosstat on June 5, 2024. According to the study, the share of unofficial income of Russian families over the past nine years has decreased. If in 2015 this figure was 37%, then by 2022 it had dropped to a record low of 10%.

The reduction in the share of hidden income, including salaries "in envelopes," informal employment and shadow earnings, occurred gradually, with an average annual decrease of 2.3%. Rosstat experts attribute these changes to several key factors. First, reducing poverty and social inequality played an important role, prompting many citizens to legalize their incomes. Secondly, the tightening of state control over compliance with tax laws has become a serious obstacle to the shadow economy.

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Фото: Freepik

The share of hidden income is decreasing, since with the development of financial technologies and effective digital tax administration, it has become more difficult for employees to pay salaries "in an envelope," said Antonina Levashenko, head of the Russia-OECD Center for the Presidential Academy.

She added that the development of the institution of self-employment also significantly affected the decline in the level of shadow income. The introduction of the self-employment regime allowed about 10 million people to legalize their income on simplified terms. This regime allows novice entrepreneurs to pay taxes in the amount of 4-6% of the income received, without resorting to registering a legal entity or individual entrepreneur.

Olga Panina, head of the Department of Public Administration at Financial University, believes that the increase in financial literacy of the population is another factor contributing to a decrease in the share of unofficial income. Citizens began to better understand the economic and legal consequences of concealing funds, as well as the benefits of official employment, such as the accumulation of pension points and the possibility of issuing tax deductions.

According to a Rosstat study, despite significant success in legalizing income, about 19% or 14.2 million workers in Russia are still employed in the informal sector without official employment. Fines for illegal employment can reach 200 thousand rubles, which is often a weighty argument for employers to comply with the laws and formalize employees.^[3]

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