Proposed Act to Combat Undeclared Work rejected

The proposed Act to Combat Undeclared Work was rejected by the christian democrat caucus in the Austrian parliament on 28 April 1999. The government's attempt to enact a law against undeclared work has therefore failed, largely as a result of controversy over its provisions for searches of homes where undeclared work was suspected.

Long in the making (AT9901127N), the Act to Combat Undeclared Work (Gesetz zur Bekämpfung von Schwarzarbeit) was rejected by the christian democrat caucus in the Austrian parliament on 28 April 1999. This in itself would not have ruled out a majority for the proposal, but it would have made it unlikely and the government would have split as the christian democratic Austrian People's Party (Österreichische Volkspartei, ÖVP) is the junior partner in the coalition. Controls will now be tightened within the framework of existing law.

The issue over which the Act eventually stumbled had already become apparent in February 1999, almost immediately after the original draft had been sent to parliament by the government. ÖVP's parliamentary negotiator was, as a matter of principle, opposed to the proposed provision for searches of private homes where clandestine, undeclared work was suspected of being performed. In April, the clause was criticised as "worthy of a police state". The Austrian Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ) had particularly supported the clause, since it felt that employers increased exposure to control needed to be balanced by checks on private undeclared activity. The more the clause permitting the searches was watered down, the more WKÖ's opposition to the new law grew. It became a "Catch 22": either ÖVP would reject it or WKÖ would, and there was no room for compromise.

Both ÖVP and WKÖwere in addition opposed to the proposed new rule requiring employers to register new employees with the social security system on the first day of work. The time allowed under the old law was (and is) three days. It is usually impossible to establish whether somebody has been employed without registration for less than three days. Furthermore, WKÖ and ÖVP grew increasingly to agree on demanding a law that would not consist only of sanctions but also offer incentives to private households to have work done by licensed companies rather than by "moonlighters". The Luxembourg model was cited, whereby a proportion of VAT is refunded on such occasions, along with other proposals included linking housing construction subsidies to the submission of formal receipts.

The value of undeclared work in Austria is estimated at between 3.5% and 10% of Gross Domestic Product.