Regulations to promote regular employment, Italy
In 2001, the government passed a law promoting the regularisation of employment through the provision of substantial incentives. The government’s move was based on the assumption that undeclared work existed due to the high level of taxes and contributions to be paid. The law targeted companies, workers and employers throughout the country. The principal objectives were to enhance social security services for workers, improve tax compliance, combat unfair competition, and reduce the level of undeclared work.
In 2001, the government passed Law No. 383 promoting the regularisation of employment through the provision of substantial incentives. The government’s move was based on the assumption that undeclared work existed due to the high level of taxes and contributions to be paid.
The regulation targeted companies, workers and employers throughout the country. The main actors involved in this initiative were: entrepreneurs; the Ministry for Labour and Social Policies (Ministero del Lavoro e della Previdenza Sociale); trade unions; business associations; the National Institute for Social Insurance (Istituto Nazionale della Previdenza Sociale, INPS); the National Institute for Industrial Accident Insurance (Istituto Nazionale per L’Assicurazione contro gli Infortuni sul Lavoro, INAIL); the prefecture; and the mayors of the municipalities where the different companies were based.
Law No. 383 expired in May 2003; however, it was integrated through the amendments introduced by:
- Law No. 409 of 23 November 2001;
- Budget Law 2002, Article 9, sub-section 15;
- Law No. 73 of 23 April 2002;
- Law No. 266 of 22 November 2002.
The principal objectives of the legislation promoting the regularisation of work were to:
- enhance social security services for workers;
- improve compliance with tax regulations;
- ensure the collection of tax, social security and insurance receipts;
- combat unfair competition;
- reduce the level of undeclared work.
The measure provided for the following two schemes, which aim to regularise employment:
- automatic regularisation procedure – entrepreneurs can declare their willingness to regularise their tax position and the workers who are engaged in undeclared work in their company. Following regularisation, during the three-year period 2002 to 2004, the entrepreneurs were able to benefit from lower taxation and a general amnesty from contributions and taxes not paid in the previous years. Workers, in particular home workers, could also regularise their social contribution and tax position through specific facilities;
- progressive regularisation procedure – entrepreneurs submit an individual regularisation plan to the Committees for Formalisation of Irregular Labour (CLES). The latter were established in 2002. They consist of 16 members representing trade unions, the Ministry for Labour and Social Policies, the Ministry for the Environment and Territory (Ministero dell’Ambiente e della Tutela del Territorio e del Mare), the INPS, the INAIL, local health units (Aziende Sanitarie Locali, ASL), the prefecture and municipality. The CLES make a technical assessment of the regularisation plan from a tax and contribution point of view. Once the CLES approve of the plan, entrepreneurs can start their emersion procedure.
Evaluation and outcome
No overall evaluation was made of the effects of the legislation at national level. However, evaluations specific to a number of geographical areas were made by trade unions and academics. Bàculo (2004) in his analysis of the regions of Naples and Avellino highlighted various shortcomings in the law itself, but particularly in relation to its enforcement. On the one hand, the institutions charged with the law’s enforcement worked separately, based on their own idea of what undeclared work was; on the other hand, the potential beneficiaries, their advisors and the business associations were discouraged from complying with the provisions of the law for different reasons. One possible reason is weak entrepreneurship and the entrepreneurs’ fear of being unable to remain in operation after the three-year period of incentives. At the same time, workers, particularly home workers, are reluctant to be regularised as they do not want to pay taxes and lose their unemployment benefits, thus indicating a low level of ‘tax morality’.
Achievement of objectives
By 2002, some 800 applications were submitted including applications from a number of workers, amounting to 1,500 persons in total. There are no data available on the estimated costs or benefits of the measure.
Obstacles and problems
An evaluation of the legislation’s effectiveness revealed the following shortcomings:
- deficiencies in the first version of the law and in its subsequent amendments generated a lack of confidence in the measure;
- due dates for the submission of applications were postponed;
- some people had difficulty understanding the law’s incentives and commitments;
- a low level of dissemination of the law was observed among the companies’ advisors;
- the social partners had a low level of involvement when the measure was being drafted.
Given the fact that there is a wide range of reasons for the rise in undeclared work, it is difficult to promote regularisation through a single tool only. Moreover, it is important to involve the institutions of the various stakeholders – such as business associations, trade unions and professional associations – when devising such measures. It would also be worthwhile launching a campaign to provide information on the measure to be promoted.
This measure can be transferred to other areas. However, efforts should be made to counteract the shortcomings highlighted. Moreover, inspections should involve workers who have come out of the informal economy, as well as those who are still in irregular employment.
A first shortcoming of Law No. 383/01 is its reliance on a single tool – that is, amnesty for tax and contribution evasion. Another deficiency is the assumption that the same levels of entrepreneurial ability and services exist throughout the country. On the contrary, the research carried out by the author and by other researchers underlines the many differences, including cultural differences, which can be found in various parts of Italy. Most importantly, in the less developed areas – which are characterised by high levels of undeclared work – regularisation policies should be linked to economic development policies. Regularisation measures will be rendered useless unless it is taken into account that some parts of the country are characterised by weak entrepreneurship, poor services for companies, or inefficient bureaucracy.
The main organisation responsible for the measure is the Ministry for Economics and Finance (Minstero dell’Economia e delle Finanze, MEF)
Bàculo, L. (ed.), Politiche di emersione e politiche di sviluppo locale, Naples, Edizioni Scientifiche Italiane, 2004.
Meldolesi, L., L’emersione 2003, Comitato per l’emersione del lavoro no regolare [National Committee for the Surfacing of Irregular Work], 2003.
Stame, N. (ed.), Per la valutazione delle politiche di emersione, Milan, Franco Angeli, 2004.
Liliana Baculo and Sara Gaudino