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Romania, EU champion of untaxed wages

Romania, EU champion of untaxed wages
16.07.2008, 17:58 10

The share of Romanians who receive untaxed wages is almost five times higher than the European average, which stands at 5%. In addition, the share of Romanians who did not know or refused to answer the question as to whether their employers used such a payment method stands at 31%, which is also the highest percentage of respondents in EU countries.
Next in the same ranking are Latvians, 17% of whom admit that they receive untaxed wages, Belgians, 14%, Lithuanians and Poles, 11% each. At the other end of the spectrum are employees in Malta, UK, Luxembourg and France, where only 1% of each country stated that they received untaxed money from their employers.
The OECD report reveals that Romania also ranks among the top countries in terms of informal employment, close to Bulgaria.
There is a difference between black market employment, which concerns people who work without contracts or documents, and informal employment, where people are employed based on a contract, but do not benefit from the entire compensation guaranteed by such a contract.
In Romania, informal employment occurs in various forms, such as subsistence farming, employees that do not file tax returns on their incomes, employers that do no register employees, workers without contract, tax evasion and evasion of social security contributions by both employees and employers, the declaration of lower incomes and fake independent contractors, the report reveals. "The problem with informal employment is that it does not occur in major companies but in small companies with up to 50 employees, of which there are a significant number locally," Labour minister Paul Pacuraru said yesterday during the launch of the OECD report.
Moreover, the minister added that many Romanians abroad are also black market employees. For instance, 40% of Romanians working in Italy do not have employment contracts, whilst the situation is similar in Spain.
Compared with how things stand in Romania, there are also countries where informal employment is even more common. "Romania does worse in this department than the Czech Republic or Slovakia, but better than countries like Ukraine, Georgia and Russia," said Theodora Xenogiani, one of the authors of the report.
She explained that the percentage of people informally employed accounted for 50% of the total.
The OECD report also reveals that two thirds of unregistered employees work in agriculture. The main sectors that employ people without employment record books are manufacturing, wholesale and retail, which account for 21% and 22% of the total.
Next is the constructions sector with 15%, agriculture - 9%, and public administration - 8%.
The coordinator of the report, Johannes Paul Jutting, explained that informal employment persists in Romania, despite the constant economic growth of the last few years, whilst two major groups of informally employed people can be identified: those who work because they have no real choice, for whom informal employment is a strategy to survive, and those who deliberately dodge taxes and social security contributions.