Coordination of undeclared work control, Lithuania
Coordination of undeclared work control was initiated in Lithuania in 2001 and a central coordination group was set up. Coordination of undeclared work control operations carried out by individual institutions was delegated to the State Labour Inspectorate. The initiative aims to make control and prevention of undeclared work more efficient. Although no special evaluation of the impact of the initiative on the incidence of undeclared work has been carried out, it has clearly contributed to more targeted and efficient activities of control authorities. In turn, this has had a positive impact on the prevention and reduction of undeclared work.
Restitution of independence in Lithuania in 1990 was followed by a transition from a planned economy to a market economy. Undeclared work emerged as one of the consequences of this process. This phenomenon seems to have become particularly prominent over the 1999–2000 period, when the consequences of the so-called Russian crisis were badly felt in the Lithuanian economy. In response to the situation, on 26 November 2001, the government of the Republic of Lithuania (Lietuvos Respublikos Vyriausybė, LRV) issued a Decree on the Coordination of Undeclared Work Control, delegating to the State Labour Inspectorate (Valstybinė darbo inspekcija, VDI) the coordination of undeclared work control operations (Nelegalaus darbo reiškinių kontrolės koordinavimas) carried out by individual institutions in the country.
The central coordination group for the control of undeclared work is comprised of representatives from all institutions and organisations enforcing control of undeclared work in Lithuania, including: the State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI), the State Social Insurance Fund Board (Valstybinio socialinio draudimo fondo valdyba, SoDra), VDI, the Tax Police Department (Mokesčių policijos departamentas, MPD) and the Police Department (Policijos departamentas, PD).
The main objective of this initiative is more efficient control and prevention of undeclared work through the coordination of efforts taken by all of the institutions involved.
To put the abovementioned decree of the LRV in force, a central coordination group for the control of undeclared work – ‘the coordination group’ – was formed. The main task of the coordination group is to analyse and assess conditions of undeclared work in Lithuania, to forecast and approve measures that aim to improve control and reduce the incidence of this phenomenon. The group carries out the following functions:
- analysis of various forms and causes of origination of the undeclared work phenomenon, taking decisions regarding the main trends and methods of prevention;
- approval of joint and coordinated inspections, a procedure for information and/or evidence exchange, control methods and recommendations;
- approval and adoption of decisions concerning the formation of coordination groups in the different counties and their operating procedures; providing methodological guidance of, and information to, the county coordination groups; organisation of supply of methodological material to the county coordination groups;
- analysis of issues relating to the coordination of undeclared work control, its findings and submitting proposals to the executive officers of control authorities and organisations concerning improvements regarding collaboration and control;
- approval of general forms of accounting of the phenomena of undeclared work, planning forms of training and qualification improvement of civil servants and public officers related to the control of undeclared work; sharing in the organisation of awareness-raising activities;
- analysis of data relating to inflicting legal liability in undeclared work proceedings, as well as consideration and approval of proposals relating to the improvement of the legislative framework regarding undeclared work;
- analysis of foreign practice in the area of undeclared work control and elaboration of proposals concerning adaptation of such practice in Lithuania;
- approval of agendas of all meetings of representatives from institutions and organisations involved in the control of undeclared work, their reports for the LRV and carrying out other functions prescribed by laws and other legislation.
Evaluation and outcome
Achievement of objectives
Although no special evaluation has been carried out in Lithuania regarding the impact of the creation of the coordination system for the control of undeclared work, based on expert analyses, it appears that this system contributed to better efficiency of the prevention of undeclared work. It also led to savings of state funds, professionalism of experts involved in this process, as well as development and adaptation of new and more effective measures to prevent the incidence of undeclared work. Activities of the control authorities became more targeted and efficient in Lithuania. All of these outcomes have undoubtedly had a positive impact on the prevention and reduction of undeclared work in Lithuania.
Obstacles and problems
One of the main problems faced by the central coordination group for the control of undeclared work in identifying the phenomenon, as cited by representatives of the group, is the collection of evidence. Staff members of the control authorities are not authorised to use video or audio equipment for the collection of evidence. However, this situation is expected to change if the Parliament of the Republic of Lithuania (Lietuvos Respublikos Seimas, LRS) approves amendments to the Law on the State Labour Inspectorate that provide for the abovementioned means of evidence collection.
Efforts have also been taken to gradually improve opportunities for collaboration among various state authorities. A very important aspect of this collaboration involves opportunities to exchange data among the different state authorities. Currently, implementation of the Agreement on the Use of Interdepartmental Tax Data Warehouse is in progress, through which many state authorities will be able to exchange data. In addition, VDI has entered into separate agreements with SoDra and the Lithuanian Labour Exchange (Lietuvos darbo birža, LDB); moreover, an agreement on data exchange is expected to be signed with VMI in the near future.
The main lesson learnt from the initiative is the joint working skills acquired by experts from different institutions. A previous narrow approach to the problem that reflected the interests of each institution has only transformed into a relatively broader systematic approach to the undeclared work phenomenon.
As mentioned above, no policy evaluations have been carried out to date, but it is clear that this measure has had a positive impact on the incidence of undeclared work in the country.
No information was available on the application of a similar practice in other countries, but it appears to be fully transferable. The main precondition for transferability is the existence of a coordinating authority and adequate human and time resources, including not only at institutional level, but also at regional and national levels.
Gediminas Noreika, Deputy Head of the Law Department of the State Labour Inspectorate
Rules of procedure of the central coordination group for the analysis of conditions of origination and control of undeclared work, as approved by Order No. 40 of 21 February 2002 of the Chief State Labour Inspector of the Republic of Lithuania.
Description of the procedure of interdepartmental coordination of undeclared activities, as approved by Order No. V-251 of 20 August 2008 of the Chief State Labour Inspector of the Republic of Lithuania.
Inga Blažiene, Institute of Labour and Social Research