(BRUSSELS) - The problem of unofficial work in the 'Black Economy' is increasing, robbing the taxman and undermining the EU's ability to create jobs and strengthen growth, the European Commission said Wednesday.

"There are no signs that the phenomenon is decreasing, indeed in certain sectors and certain forms of work, it appears to be growing," said EU Employment Commissioner Vladimir Spidla.

"The hidden economy undermines the financing of social security systems, hampers good economic policies and can lead to social dumping," Spidla told a press conference to mark the release of a Eurobarometer report on the issue.

The EU's executive arm proposes lower national taxes, less red tape for legitimate employers and a slackening of the restrictions imposed by some member states on workers from new members, notably the former Soviet bloc states of eastern European that have joined since 2004.

A satisfactory minimum wage can also encourage workers to get out of the casual, unprotected sector, said Spidla.

The Eurobarometer survey revealed that undeclared work is particularly prevalent in southern and eastern Europe.

Across the EU, five percent of employees admit receiving cash-in-hand wages, varying from three percent or less in most continental countries, plus Britain and Ireland, to over 10 percent in some central and eastern European countries.

Students are often the culprits, or victims, along with the unemployed and the self-employed, particularly in the construction and household services sectors.

"The detection risk also matters," said the Commission.

If people who consider the risk of detection to be small they are more likely to be involved in undeclared work.

The Commission's quest to wipe out the unmonitored, untaxed job market may face some stiff, if anonymous, opposition.

Almost half (47 percent) of the suppliers of undeclared work, when asked the reasons for not declaring it answered that it was because "both parties benefitted from it," the report said.

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