Brussels, 05/07/2013 (Agence Europe) - The European Commission today hopes to prepare the ground for new European measures with a view to combating undeclared work, together with an initiative to be adopted by the end of the year. Thus, a consultation exercise with representatives of trade unions and employer organisations was launched on Thursday 4 July. This “scourge” of undeclared work which “puts workers at greater risk” also “deprives governments of tax and social security revenue”, says Commissioner Laszlo Andor (employment, social affairs and inclusion). It is, however, on the decline, as can be seen in the findings of a recent study by Eurofound.
The Commission's intentions are clear. It wishes to discourage undeclared work in the EU. At European level, undeclared work is defined as “any paid activities that are lawful as regards their nature but not declared to public authorities”. A 2007 Commission communication states that undeclared work is therefore not a criminal activity, although it “links undeclared work with tax and/or social security fraud”. A broad range of activities are affected by this phenomenon ranging from child-minding to gardening, and including, for example, building work.
One might ask whether the period which followed the 2008 financial crisis promoted the “black” economy. Common sense might suggest that this was the case. However, according to the Eurofound report, “Tacking undeclared work in 27 European Union member states and Norway”, published on 4 June, this is not so. The undeclared economy is considerable in size, being equivalent to 18.4% of the GDP of the EU. Nonetheless, the scale of undeclared work has considerably declined since 2008 when it stood at 22.3% of GDP. There has been a decline in all member states, the report underlines, although there are considerable differences with, for example, the undeclared economy being equivalent to 7.6% of GDP in Austria and 31.9% in Bulgaria. The decline has been greater in southern Europe, with a fall in demand at the same time as remuneration.
With the launch of this consultation, which will run until 20 September 2013, the Commission hopes to group together all the good ideas to essentially improve cooperation between the national authorities, unless a universal miracle cure is found. This could mean improved cooperation between member states' enforcement authorities “such as labour inspectorates, tax and social security authorities. Such cooperation could include the sharing of best practices on prevention and deterrence measures, identifying common principles for inspections of employers, promoting staff exchanges and joint training and facilitating joint control actions”, a Commission press release reads.
Two considerations are highlighted to justify the need to combat this “scourge”. Reducing informal work would make it possible to reduce unemployment, while filling the public coffers. Andor also highlighted the risks of such activity for the worker, saying: “It puts workers at greater risk of poverty and potentially dangerous working conditions. It undermines workers' job security, access to pensions and health care”.
Seeking to find the causes of this “complex phenomenon”, the Commission cites a range of different factors such as “excessively high taxes on labour and other labour costs”. This is also an opinion shared by an increasing number of member states, as it has been found that the measures that work, other than quite simply prosecution and penalties, are those that bring direct tax incentives, such as tax relief, lower income taxes and subsidy programmes.
However, according to the conclusions of the Eurofund report, there is no correlation “between lower tax rates and the smaller undeclared savings”. Thus one of the conclusions of the report is rather surprising - the more the current austerity measures tend to be “neo-liberal”, which, according to Eurofund, implies reduction in taxes, labour market deregulation and withdrawal of public support - the bigger the undeclared economy. “Social-democratic” austerity measures, focused on strengthening the role of the state in the labour market and the continuation of the welfare state, will have the inverse effect.
Be it the Commission or the Eurofund report, both argue in favour of a better sharing of good practice so as to spread to all the member states the mass of new initiatives undertaken by some - initiatives which aim to discourage undeclared work. This is a proposal that could be all the more beneficial as these initiatives are “transferable to other sectors and countries”. Like the Commission, the Eurofund report encourages the EU to equip itself with a “bank of knowledge” in order to identify new possibilities for political initiatives. (JK/transl.jl/fl)