Helsinki (02.11.2010 - Juhani Artto) Data on the ever growing grey economy worries the union confederation SAK. "It is not only a question of lost taxes and fees but also the negative impact on the fairness of competition in business life, on the status of employees, on general tax morality and on the credibility of the entire tax system", SAK says in its large and detailed initiative on the grey economy, published on Tuesday.
The document includes 25 proposals on how to amend current legislation to make it a more effective weapon and barrier against the grey economy. These proposals are grouped into six blocks.
The first aims to put domestic entrepreneurs on an equal footing with foreign companies. As the situation now stands, according to SAK, foreign companies can easily evade their tax and other monetary obligations. It helps them win tenders unfairly as their costs are lower than those of their Finnish competitors.
Hundreds of foreign companies, especially in the construction, metal (engineering shop) and cleaning branches, take advantage of the legislative loopholes and lack of overall effective control. These companies employ tens of thousands of employees in Finland annually, often paying them less than that set down in collective agreements.
The second block of legislative initiatives concerns contractor's obligations and liability when work is contracted out. Originally, the idea of the legislation was to make contractors liable for checking and making sure that their subcontractors take care of their tax and other duties properly and according to the law. The act was amended in 2006 but, in practice, it remains ineffective.
SAK's detailed proposals would essentially increase responsibilities on companies who then contract work out. SAK also wants European level legislation concerning contractors' liabilities. It says that the resolution, approved by the European parliament on 3 March 2009, offers a good starting point for much needed legislative work. This resolution supports European legislation on a contractor's liabilities when it comes to wages and salaries.
The third block focuses on ways to prevent employees from being abused. SAK seeks legislation that would give national union organizations the right to sue in the courts, on behalf of an employee, even in cases where the employee concerned has not given the organization the authorisation to do so. "Such a right would have a significant pre-emptive impact especially in wage discrimination cases towards foreign employee", SAK says.
Another proposal is this: that the EU should have its own occupational safety agency. It could, for example, monitor how employees' rights are being enforced.
The other three blocks of initiatives deal with tax control on capital gains, punishment for economic crimes and several other issues.
And finally, there is the big question of the lack of resources and powers available to authorities in tackling the grey economy. SAK is at pains to stress, as it has done so many times in the past, that investment in these resources is not an expense but an investment that brings multiple dividends to the state and society in the form of increased tax revenues, healthier competition and improved rights' protection.