Commission européenne The Fight Against Undeclared Work : A New Challenge for an Enlarged Europe ? Cicero Foundation Seminar, April 2008 Guido VANDERSEYPEN DG Employment, Social Affairs and Equal Opportunities, EUROPEAN COMMISSION

Commission européenne Structure of presentation 1.Definition of Undeclared work (UDW) 2.Why bother about UDW ? 3.Estimates of UDW as % of GDP 4.Socio economic facts from an EU survey (1) 5.Socio economic facts from an EU survey (2) 6.EU policy mix for the fight against UDW 7.Some success stories 8.Policy issues 9.Follow up to COM(2007) References

Commission européenne Definition of UDW « Any paid activities that are lawful as regards their nature but not declared to public authorities, taking into account differences in the regulatory system of Member States » = an activity based definition as opposed to enterprise- or job-based definition = emphasis on social security and tax fraud excludes criminal activities

Commission européenne Undeclared work undermines the financing of social security may go together with tax and social security fraud represents a negation of the principles of flexicurity Constitutes a pull factor for illegal immigration may result from dysfunction of European labour law 2. Why bother about UDW ?

Commission européenne UDW incidence in EU Member States

Commission européenne Socio economic facts according to Special Eurobarometer % of respondents acquired undeclared goods or services UDW performed by 5% of respondents (mainly as side activity) Wages paid cash-in-hand to 5% of employees in EU (up to 10% in new MS) - estimated at 2% of total wage bill

Commission européenne Socio economic facts according to Eurobarometer 284 (ctd.) Main sectors : household and personal services, construction, horeca and repair The performers : high incidence among students, jobless, self-employed* Detection risk high for 1 respondent out of 3 …and 18% of public thinks no risk of a fine * NB outside scope of survey : illegal immigrants and transactions between companies

Commission européenne EU POLICY MIX A Council resolution of calls for: –reducing the financial incentives for UDW in tax and benefit systems (incl. the permissiveness of the social protection systems); –administrative reform and simplification, with a view to reducing the cost of compliance with regulations; –strengthening the surveillance and sanction mechanisms, with the involvement of labour inspectorates, tax offices and social partners; –trans-national cooperation between Member States, and –awareness raising activities.

Commission européenne some SUCCESS Stories Service vouchers for household services (e.g. BE, SP) Increased minimum wage as a threshold for declaration (PT, PL, SK) Flat taxes avoiding distortions between dependent work and (false) self employment (EE, SK) VAT reduction for labour intensive services (FR) Simplified registration for seasonal work etc. (FR) Laws & Action plans on UDW (DE, FR, IT ) Social Partner Agreements (DE, NL) Regularisations (IT, SP, PT) Public campaigns (LV, LT)

Commission européenne Policy Issues Taxation on low productivity jobs Extra social security contributions on overtime Taxation regime for (false) self employment Level of minimum wages Transitional arrangements limiting access to EU-15 Flexicurity Detection of tax and social security fraud Role of social partners in law enforcement Administrative cooperation incl. transnational Regularisations and amnesties

Commission européenne Follow up of COM(07)628 Improved quantification of UDW Focus in Lisbon Strategy reporting (UDW as a dimension in flexicurity pathways) Exchange of good practices (Employment Cttee etc.) Review of transitional arrangements Social Partners Work programme Regulatory simplification (posted workers, social security) Setting up « platform » for info. exchange

Commission européenne REFERENCES Communication COM(2007)628 Council resolution of (OJ C 260/1 of ) Study « UDW in an enlarged Union » Eurobarometer Special Survey European Employment Observatory