German bill to tackle undeclared work and child benefit fraud

Finance minister Scholz has presented a bill to give German customs more employees and powers.

German Finance Minister Olaf Scholz has presented a bill for German customs to be given more employees and powers. EURACTIV Germany’s media partner Der Tagesspiegel reports.

Some foreign workers in the German construction sector live in dreadful conditions, toiling away during the day for a few euros and then sleeping in a dump at night. Being given staff and powers should allow German customs officials to adopt a tougher line against undeclared work.

“Illegal employment is not a trivial matter,” said the social democrat Finance Minister Scholz on Wednesday (20 February) after the cabinet adopted his bill. According to Scholz’s ministry, in the last two years alone, German customs uncovered losses of about €1.8 billion due to illegal employment, undeclared work and benefit fraud.

Having people lining up for work was an extreme situation, Scholz added, with men and women waiting on outlying streets to be recruited for hard physical work. This work is usually given to those willing to work for the least pay.

In the future, German customs official should be able to intervene when such employment is initiated. Moreover, customs officials will be able to support the police in cases of suspected exploitation, forced labour and human trafficking.

Foreign workers’ housing conditions should also be improved. The German finance ministry said that these workers should not live in overcrowded “junk properties” with overpriced rents. Scholz added that in some major cities these workers had to shift towards seeking shelters for the homeless. He spoke of “unbearable conditions” on mattresses, a housing situation which did not comply with any regulations.

Reducing child benefit fraud

German customs are to deal more intensively with fictitious invoices and obscure company structures in the construction industry. In the future, among other measures, officials will be able to more easily monitor suspects’ telecommunications and, in the case of letter-box companies, intervene when it is unclear where a company’s real workplace is.

The construction sector is also in the spotlight because those actually responsible for the workers are sometimes concealed by sub-contracting firms. These are used in order to evade taxes and charges. Meanwhile, there is supposed to be tougher documentation requirements for the working conditions of those employed in the security sector.

There is also the aim of curbing social benefit fraud. According to the German finance minister, family allowance offices increasingly notice organised fraud with respect to child benefits. Criminal networks are supposedly bringing non-EU citizens to Germany and providing them with false documents so that they can apply for this benefit.

In 2017, job centres said that the damage caused by this fraud by gangs amounted to €50 million. However, this only covers what has been identified and the total figure is presumably much higher.

The new law means that citizens from other EU countries will not receive any money if they are unable to prove that they are working in Germany.

“This is because it cannot be ruled out that child benefit does not trigger an intended incentive effect for people to migrate from other member states,” the proposal said.

Employees benefit from freedom of movement in the EU and therefore have a right to this benefit. Until now, there have hardly been any checks into whether an applicant actually has a job, which is something Scholz wants to change.

The family allowance office for the German Federal Employment Agency (BA), which pays out the money, is to be given its “own verification authority.” In cases of doubt, it can temporarily suspend payments. Moreover, authorities such as BA and immigration offices  will be able to share information.

More tasks for too few staff

In recent years, German customs have had an increasing number of tasks. These have included monitoring undeclared work and minimum wages, collecting road tax and fighting against money laundering.

At the same time, there is much to do in its core activity, with an increasing number of packages coming from abroad due to e-commerce. As a result, the trade union has long complained about a significant shortage of staff. Another reason is that 40% of customs officials will reach retirement age over the next ten years.

Until now, an increase in staff at the financial control department for undeclared work (currently around 7,900) to more than 10,000 in 2026 was envisaged. An additional 3,500 positions will now be created.

Dieter Dewes, chair of the German customs and finance union (BDZ), welcomed the bill. However, he said that “with the new tasks, we need 15,000 employees,” who would also have to be recruited and trained. According to Scholz, the law should come into force before the German parliament’s summer break.

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