The Fight Against Undeclared Work : A New Challenge for an Enlarged Europe ?

1
The Fight Against Undeclared Work A New
Challenge for an Enlarged Europe ?
Cicero Foundation Seminar, 17-18 April
2008 Guido VANDERSEYPEN DG Employment, Social
Affairs and Equal Opportunities, EUROPEAN
COMMISSION
2
Structure of presentation

• Definition of Undeclared work (UDW)
• Why bother about UDW ?
• Estimates of UDW as of GDP
• Socio economic facts from an EU survey (1)
• Socio economic facts from an EU survey (2)
• EU policy mix for the fight against UDW
• Some success stories
• Policy issues
• Follow up to COM(2007)628
• References

3
1. Definition of UDW

•  Any paid activities that are lawful as regards
  their nature but not declared to public
  authorities, taking into account differences in
  the regulatory system of Member States 
• an activity based definition as opposed to
  enterprise- or job-based definition
• emphasis on social security and tax fraud
• excludes criminal activities

4
2. Why bother about UDW ?

• Undeclared work
• undermines the financing of social security
• may go together with tax and social security
  fraud
• represents a negation of the principles of
  flexicurity
• Constitutes a pull factor for illegal immigration
• may result from dysfunction of European labour
  law

5
3. UDW incidence in EU Member States
6
4. Socio economic facts according to Special
Eurobarometer 284

• 11 of respondents acquired undeclared goods or
  services
• UDW performed by 5 of respondents (mainly as
  side activity)
• Wages paid cash-in-hand to 5 of employees in EU
  (up to 10 in new MS) - estimated at 2 of total
  wage bill

7
5. Socio economic facts according to
Eurobarometer 284 (ctd.)

• Main sectors household and personal services,
  construction, horeca and repair
• The performers high incidence among students,
  jobless, self-employed
• Detection risk high for 1 respondent out of 3
• and 18 of public thinks no risk of a fine
• NB outside scope of survey illegal immigrants
  and transactions between companies

8
6. EU POLICY MIX

• A Council resolution of 29.10.2003 calls for
• reducing the financial incentives for UDW in tax
  and benefit systems (incl. the permissiveness of
  the social protection systems)
• administrative reform and simplification, with a
  view to reducing the cost of compliance with
  regulations
• strengthening the surveillance and sanction
  mechanisms, with the involvement of labour
  inspectorates, tax offices and social partners
• trans-national cooperation between Member States,
  and
• awareness raising activities.

9
7. some SUCCESS Stories

• Service vouchers for household services (e.g. BE,
  SP)
• Increased minimum wage as a threshold for
  declaration (PT, PL, SK)
• Flat taxes avoiding distortions between dependent
  work and (false) self employment (EE, SK)
• VAT reduction for labour intensive services (FR)
• Simplified registration for seasonal work etc.
  (FR)
• Laws Action plans on UDW (DE, FR, IT )
• Social Partner Agreements (DE, NL)
• Regularisations (IT, SP, PT)
• Public campaigns (LV, LT)

10
8. Policy Issues

• Taxation on low productivity jobs
• Extra social security contributions on overtime
• Taxation regime for (false) self employment
• Level of minimum wages
• Transitional arrangements limiting access to
  EU-15
• Flexicurity
• Detection of tax and social security fraud
• Role of social partners in law enforcement
• Administrative cooperation incl. transnational
• Regularisations and amnesties

11
9. Follow up of COM(07)628

• Improved quantification of UDW
• Focus in Lisbon Strategy reporting (UDW as a
  dimension in flexicurity pathways)
• Exchange of good practices (Employment Cttee
  etc.)
• Review of transitional arrangements
• Social Partners Work programme 2006-2008
• Regulatory simplification (posted workers, social
  security)
• Setting up  platform  for info. exchange

12
10. REFERENCES

• Communication COM(2007)628
• Council resolution of 29.10.2003
• (OJ C 260/1 of 29.10.2003)
• Study  UDW in an enlarged Union 
• http//ec.europa.eu/employment_social/incentive_me
  asures/activities_en.htm2004
• Eurobarometer Special Survey 284
• http//ec.europa.eu/public_opinion/archives/eb_spe
  cial_en.htm
• European Employment Observatory
• http//www.eu-employment-observatory.net/index.asp
  x