Undeclared work and incomes are aserious concern for the Government of Hungary, primarilybecause of the negative consequences for the country'salready difficult fiscal situation. The Government hasalready introduced a number of reforms intended to reduceundeclared economic activity. Much of the effort to thispoint has focused on strengthening the "stick"through enforcement and sanctions. A successful strategy tocombat the undeclared economy also requires more effective"carrots" that improve the incentives to operatein the formal sector. The most important measures willinvolve reforms to lighten the tax burden, especially onlabor. Public information and education is the final elementin a strategy to move Hungary to the "tippingpoint" in the struggle against the undeclared economy.
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