Self-employed targeted as ‘black economy’ grows

Would you have any qualms about paying someone 100 crowns an hour to clean your home if you knew it was not being declared to the tax authorities? Or would you insist on paying the full 400 crowns an hour and demand a receipt?

It seems that more and more Swedes are inclined to go for the cash-in-hand, no-questions-asked option, fuelling the demand for black market labour in the country. And on the other side of the knowing handshake is an increasing number of workers whose only records of toil are the blisters and aches of manual labour.

Sweden’s black market is now worth between 60 and 100 billion crowns a year according to Staffan Ivarsson, who is leading research into the black economy in the EU. He told Dagens Industri that that means around 5% of the total hours worked in Sweden are untaxed.

One reason for the increase, said Ivarsson, is that Swedes are becoming less willing to pay tax “because of a lack of faith in the authorities and leaders”. And he believes that young people are far more tolerant of untaxed work than older generations.

Evidence quoted in Saturday’s Metro would appear to support Ivarsson’s theory: of 89 Stockholm bars checked last year over half were found to be paying staff cash-in-hand with no tax declaration.

And of the 46 bars found to be using untaxed labour, 10 didn’t have a single above-board employee.

“Nobody, from waitresses and bartenders to dish-washers, had any papers,” said Jan-Olof Tidbeck at Stockholm Council’s social unit.

Apparently bar owners have picked up on the fact that if they hire staff through a personnel agency they are not responsible for registering them for tax. But that’s not good enough, said Tidbeck, who has proposed to the justice department that owners should share responsibility with the agencies.

Staffan Ivarsson is even more hardline and wants to target the individuals themselves.

“The risk of being discovered must increase,” he said. “We need to crack down on this because if the news spreads that there’s not much chance of being caught the black economy will increase.”

The government agrees and later in the autumn will propose three measures to combat the spread of untaxed labour.

The headliner as far as Svenska Dagbladet was concerned is a new time-limited tax code, designed to stop people from working indefinitely on a self-employed basis when to all intents and purposes they’re really just employed by one company.

“By introducing a time-limited tax code we can really test whether it’s a company which genuinely has work or if the person is just an employee,” said the Social Democrat employment minister Hans Karlsson.

The government will also propose that unions should be able to “check and negotiate on behalf of people who aren’t members”, as well as making self-employed people responsible for other self-employed people working under them.

Karlsson told SvD that he could support a tax break for household work, one of the main untaxed areas.

“I think that a tax allowance could have certain benefits,” he said. “But I don’t think that people would stop paying cash-in-hand. Even if someone cleans for 150 crown an hour legally a lot of people will prefer someone who cleans more cheaply but untaxed.”

On Wednesday SvD reported the results of its own survey into people’s use of illegal labour in the home. 8% of Stockholmers admitted that they had used untaxed cleaners in the last twelve months. This was more than twice the rate in the rest of the country.

Do more than 8% of people in the Stockholm area have cleaners at home? It’s possible that another way of putting it is that everyone who uses cleaners uses illegal cleaners – and Staffan Ivarsson for one thinks that the number sounds rather low.

“People are quite obviously not honest when answering questions on the telephone about their own crimes,” he said.

Sources: Svenska Dagbladet, Expressen, Dagens Industri