Analytics, Estonia, Markets and Companies, Shadow economy, Wages

International Internet Magazine. Baltic States news & analytics Wednesday, 23.09.2020, 15:16

Estonian chamber: Entrepreneurs' assessment re ratio of cash-in-hand wages has decreased

BC, Tallinn, 10.12.2018.Print version
Estonian entrepreneurs' estimation of the share of cash-in-hand wages paid in their sector has decreased on year, it appears from the results of a survey conducted among the members of the Estonian Chamber of Commerce and Industry, reported LETA/BNS.

Contrary to the trend observed in the previous survey, the share of the respondents estimating that the ratio of cash-in-hand wages in their sector has decreased has gone up this fall. Nearly half of the respondents approximated that the share of cash-in-hand wages in their sector is up to 5%, and a fifth said it is 6 to 10% the chamber said. 

Entrepreneurs also estimated that the ratio of employees whose income went entirely undeclared had declined slightly.

Director general of the Chamber of Commerce and Industry, Mait Palts, said that it is positive that the increasing wage pressures have not resulted in a significant rise in cash-in-hand wages.

"Even though the situation with cash-in-hand wages is continuously worrying and the increasing wage pressure forces honest entrepreneurs to make even more of an effort, it is good to see that people do not resort to dishonest methods, even though the pressure is strong," Palts said, adding that in order to ensure good tax receipts and honest competition, the tax authority and market participants need to consistently seek new solutions both in terms of fiscal supervision and other preventive methods, and the legislator needs to analyze how to use the tax system to motivate people to pay they taxes honestly.

Rivo Reitmann, deputy director general of the Tax and Customs Board, said that the tax authority aims for enhanced cooperation and exchange of information when it comes to surveillance over cash-in-hand in relation to public procurement objects. "Construction procurements account for a third of the yearly volume of tenders, which reaches two billion euros, however, recent checks indicated that seven percent of the construction workers employed on state procurement objects did undeclared work and received their wages fully cash-in-hand," Reitmann said.

Reitmann added that public procurements have an important role in the economy and fostering honest competition. "Our wish is that the state's money should not reach a company that does not follow tax rules, and all institutions who organize public procurements have an important role in it. Thus, we are very pleased that [the Estonian state-owned electricity distribution network operator] Elektrilevi, one of the largest procurers in the state, is implementing these very principles in its tenders," Reitmann said.

Elektrilevi's construction field manager Kristo Kulljastinen said that the operator does the majority of its works in cooperation with partners, entering into approximately three procurement contracts every workday. "Our experience shows that businesses who treat their employees fairly and pay taxes, are more trustworthy in other matters as well. Thus, we are to implement in all our contracts a term that the partner company's remuneration has to be at least 70% of the sector's average," he said.  

The Estonian Chamber of Commerce and Industry has conducted surveys on cash-in-hand wages among its members since 2014.

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