Commission launches consultation on undeclared work
The European Commission has launched a consultation asking social partners for their views on the issue of undeclared work. The Commission wants discussions on further EU measures to prevent and deter undeclared work. Plans are being put forward to promote improved cooperation between enforcement authorities in Member States, such as labour inspectorates and tax and social security authorities. The deadline for submission of views and comments is 20 September 2013.
The European Commission has launched a formal consultation (87 KB PDF) among EU social partners on the subject of undeclared work. The Commission wants to promote further EU cooperation between authorities in Member States to prevent and deter undeclared workers. The consultation comes under Article 154 of the Treaty on the Functioning of the European Union (TFEU).
The consultation document defines undeclared work 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 the Member States’. The consultation excludes the problem of illegal activities.
It bases its definition on a 2007 Communication on stepping up the fight against undeclared work.
This latest Communication states that the three main issues surrounding undeclared work are:
- abusive behaviour regarding working conditions and/or health and safety norms, leading to the involvement of Labour Inspectorates;
- fraud on social insurance contributions, involving social security inspectorates;
- tax evasion, adding to the work of tax authorities.
The Communication also refers to the practice of ‘bogus’ self-employment, when a worker is classified as self-employed rather than an employee to avoid obligations such as the payment of taxes, social security contributions or compliance with labour laws. It states that the abuse of the status of self-employed worker is becoming more frequently associated with undeclared work.
Tackling the undeclared work issue
The Communication points to a range of activities that have been carried out at EU level to try to curb the practice of undeclared work. An updated EU online database on tackling undeclared work was recently produced by Eurofound, covering measures against undeclared work in the EU Member States and Norway.
The Commission concludes that:
...greater cooperation at EU level is necessary in order to tackle undeclared work in Member States more effectively and efficiently… since undeclared work is dealt with at national level by different actors, such as labour inspectorates, social security and tax authorities, it is necessary to involve all these actors in whatever form of cooperation is decided at EU level.
The Commission believes that enhancing cooperation at EU-level between enforcement authorities, such as labour inspectorates and social security, tax and migration authorities, would greatly improve the situation.
In particular, it believes that this would:
- improve the knowledge and measurement of the phenomenon of undeclared work;
- enable the sharing of best practices, not only on deterrence measures but also on prevention;
- identify common principles for inspections;
- promote exchanges of staff and joint training;
- facilitate joint control actions.
It suggests that one way of doing this would be for the Commission to set up a European platform, comprising representatives of the Member States and other stakeholders. It poses the following questions about the composition and function of such a platform.
- Should membership be mandatory or could Member States join voluntarily?
- Should the platform deal only with cross-border issues or widen its scope to national issues?
- Should all the pillars be covered or should the platform’s work be limited to labour inspections?
- Should the platform also deal with the phenomenon of bogus self-employment?
- How far-reaching should the tasks of the platform be?
- Should the tasks consist only of sharing information and best practices or should they go further by developing specific expertise and improving operational cooperation?
- What form should the platform take?
- Should it be established as an individual body or as a subgroup to an existing body or as a part of an agency such as Eurofound?
The Commission is also running an impact assessment to look at these questions. It is asking the social partners for their views on the content of this Communication, whether action at EU level is justified, what their preferences would be, what role they would foresee for the social partners, and whether the social partners would be willing to negotiate an initiative in the area of undeclared work.
The social partners have until 20 September 2013 to respond.
The issue of undeclared work is a complex and important one and, as the Commission notes in its Communication, there is no simple solution to the problem. However, it is clear that some type of enhanced cooperation at European level may help to coordinate the efforts of national-level authorities in the areas of tax, social security and labour legislation.
Reducing levels of undeclared work in the EU would help to increase job creation, improve job quality and promote fiscal consolidation.
It is clear that the Commission wants to move forward on this issue. It is now up to the social partners to decide whether they would like to embark on negotiated action.
Andrea Broughton, Institute for Employment Studies