In a new Communication on undeclared work, the Commission recommends that member states learn from each other and co-operate to combat a phenomenon that takes a good deal of what workers earn away from tax collectors and social security cash registers.
With a 1993 White Paper and a 1998 Communication, the Commission announced its fight against undeclared work, which the communication defined as “any paid activities that are lawful as regards their nature but not declared to public authorities, taking into account differences in the regulatory systems of member states”. In 2007, the phenomenon is still huge, accounting for 15% of GDP or more in ten member states, as a new Eurobarometer survey revealed.
Employment Commissioner Vladimír Špidla considers the socio-economic impact of undeclared work to be highly negative: “The hidden economy undermines the financing of social security systems, hampers good economic policies and can lead to social dumping,” Špidla said in Brussels on 24 October.
While the trend is for undeclared work to increase in many countries, some others have managed to reduce the phenomenon. The Commission examined best practices in those member states that manage to get a grip on ‘moonlighting’ and came up with a number of recommendations for member states to combat undeclared work:
- Reduce labour taxation and decrease administrative burdens;
- review transitional arrangements for workers from the new member states as soon as possible and in any case before the next phase due early in 2009; and;
- involve social partners actively in the fight against undeclared work.
In addition, the Commission recommends facilitating the exchange of good practices, in order to evaluate policies more systematically and better measure undeclared work. It also suggests establishing a European platform for cooperation between labour inspectorates andintegrating concerns about undeclared work in the common principles for flexicurity to be discussed at the 5-6 December Employment Council.