The main purpose of this project was to conduct a study on tax evasion and labor informality in Kosovo. By conducting a survey with 600 SME’s throughout Kosovo, by conducting four case studies and by making use of standard statistical models, the research team has produced a report in an attempt to offer a general picture of the tax evasion and labor informality in Kosovo; its size, determinants and the potential economic consequences it may cause. Topics such as tax evasion, tax morale and labor informality were elaborated in the Kosovo context. The final report was organized into six chapters. The first chapter provides the reader with an overview of the general academic debate on the subject. It explains the origin of the concept and introduces the most important definitions of informality. Second chapter provides a general review of methodological approaches that have been undertaken to conduct research on this issue. Further, the approach of this study was described and explained. Chapter four and five, report on, discuss and analyze the results of the survey and case studies. Finally, the study concludes with a summary of the major implications and policy recommendations for various stakeholders.