Strategies to reduce contribution evasion in social security financing

Contribution evasion is a serious problem for social security financing in many countries. A mixture of strategies may be most effective in reducing the underpayment and nonpayment of mandatory social security contributions by employers and workers. Contribution evasion can be reduced by changes in: (a) the incentives inherent in the design of social security systems, (b) employer, worker and governmental attitudes toward compliance, (c) administrative procedures that improve the efficiency of contribution collection by government or reduce the cost to workers and employers of compliance, and (d) macroeconomic policies that maintain low inflation and provide for low unemployment with stable growth. (C) 2001 Elsevier Science Ltd. All rights reserved.