Social partners demand measures to combat illicit work

A recent scandal in Austria over illegal employment practices in road haulage triggered a nationwide debate in early 2002 on measures to combat illicit work. Estimates indicate that the informal economy grew almost twice as fast as the formal economy in 2001. While both trade unions and employers' organisations demand that the government take action against illicit work, they disagree on the appropriate measures to tackle the growing informal economy.

After a summit meeting on 11 February 2002, the presidents of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) and the Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ), Fritz Verzetnitsch and Christoph Leitl respectively, stated that they will go to any lengths to combat illegal work in Austria. A long-running debate over measures to end tax evasion and illicit economic activity has regained momentum in the course of a recent scandal in the road haulage sector. In order to survive the fierce price competition within the single European market, it has emerged that a large number of Austria's road haulage companies are suspected of committing 'social fraud' (ie non-payment of social contributions and/or taxes) (AT0202203F). As a consequence, the social partners announced their intention to introduce a 'seal of approval' (Gütesiegel) for road haulage companies, certifying that the firms comply with legal regulations, provide fair working conditions and therefore contribute to fair competition and road safety. The seal of approval scheme seeks to support and encourage the vast majority of companies in the branch that are acting properly.

However, 'international road haulage is not the only branch where organised illicit work increasingly takes place', as an official of the Construction and Timber Workers' Union (Gewerkschaft Bau-Holz, GBH) has pointed out. According to a recent study conducted by Friedrich Schneider, an economist at the Johannes Kepler University in Linz, the vast majority of illicit employment relationships in Austria are found in the construction industry (38%), followed by hotels and restaurants (17%) industrial production (16%), and the entertainment sector (14%). The remaining 14% are found services such as childcare, hairdressing and private tuition. In 2001, the informal economy (also referred to as the 'shadow' or 'hidden' economy) is estimated to have accounted for about EUR 22 billion, or 10% of Austria's total gross domestic product (GDP). Lost tax and social insurance contributions amount to as much as EUR 7 billion. With a growth rate of 3% in 2001, the shadow economy grew almost twice as fast as the formal economy.

Against the backdrop of prevailing weak economic conditions, the WKÖ president has urged the government to reduce the economic incentives for illegal work. He refers to the high tax burden in Austria and calls for an immediate reduction of non-pay labour costs, plus corporate and income tax cuts by the year 2003.

In contrast with WKÖ, ÖGB wants to tackle the problem of illicit work through more effective legislation against social fraud and tax evasion. However, as a first step, the government wants to overcome the lack of coordination among the responsible public authorities. The minister of the interior, Ernst Strasser, and the minister of economic and labour affairs, Martin Bartenstein - both members of the conservative People's Party (Österreichische Volkspartei, ÖVP) - intend to create an office in which, among others, the police, customs officers, employment inspectors and tax investigators will coordinate their activities against organised illegal employment. It remains to be seen if the government and social partners will agree on further measures to curb illegal work in Austria.

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