Government plans tougher penalties for organised 'social fraud'

Against the background of reports of large-scale, organised tax and social security fraud committed by some employers, in summer 2004 Austria's Minister for Justice presented a draft bill that aims to tackle illicit employment practices by introducing tougher penalties. Organised labour supports this initiative.

During summer 2004, the Austrian media have alleged a series of cases of large-scale 'social fraud' committed by companies in various sectors. The most recent and prominent such cases refer to a large German-based food retailer that runs hundreds of stores in Austria and a road haulage company headquartered in Carinthia.

With respect to the food store chain, in August 2004 a former manager claimed that the company has systematically used illegal employment and payment practices for years, lending support to a long-standing suspicion held by organised labour . According to the manager, a large number of employees have been refused legal payment for extra hours and overtime work. Instead, they have been paid - if at all - 'extra wages' in cash directly withdrawn from the till or in the form of vouchers, mostly without any receipts. The Chamber of Labour (Arbeiterkammer, AK) accuses the company’s management of thus having defrauded both the tax authorities and the social insurance institutions, since such forms of payment are not registered in the 'official' wage account books. As for the road haulage company, its chief executive has been accused of illegally employing 174 lorry drivers, most of them Croatian citizens without an employment permit. These illicitly employed drivers have allegedly been paid in line with their mileage driven, which is unlawful, instead of receiving regular wages according to the relevant collective agreements, with neither taxes nor social insurance contributions paid on their behalf.

Against the background of a growing number of revelations about fraudulent companies, in particular in the construction sector (AT0302202F), the Minister for Justice, Karin Miklautsch of the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ), has reactivated plans first drawn up by her predecessor to introduce legal measures in order to combat such organised 'social fraud' practices. The Ministry of Justice has drawn up a draft bill which aims to extend the existing provisions of criminal law, in particular to illegal social insurance payment evasion. According to the Minister’s plans, following consultations with experts, the new law will be endorsed by parliament in the course of autumn 2004 and come into effect on 1 January 2005. Organised 'social fraud' will then face tougher punishment, including imprisonment of up to 10 years. At present, the Criminal Code, while applying to fraud, does not explicitly apply to cases of social security and tax fraud. Correspondingly, virtually all employers that act illicitly in this respect face the threat only of administrative fines (AT0202203F). For this reason, organised labour supports the Minister’s initiative to tighten up fines for organised 'social fraud'.

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