Everyone is looking for a higher net income at the end of the month, but the methods used by different companies hide a harsh reality in the world of work. Thousands of workers accept alternative schemes to increase their clean salaries, bypassing the payment of taxes owed to the State. The practice of receiving payments on the outside has become a silent epidemic that seriously harms the financial future of those who follow this strategy.
The method involves paying part of the remuneration in cash or through false daily rates and unused miles. The investigation is advanced by the newspaper, which exposed the alarming dimension of the national parallel economy. A substantial portion of the working class is registered with the minimum wage, but takes home much higher amounts that escape the IRS radar.
The reports collected demonstrate that this tax evasion covers several sectors of activity and different levels of school education. There are sports instructors earning almost three thousand euros net per month, two thirds of which escape any official record. The same scenario is repeated in highly qualified areas such as information technologies or in traditional sectors such as catering.
The heavy bill of informality
Extra money in your wallet at the end of the month creates a false sense of financial security during the early years of youth. The same source indicates that the scenario reverses dramatically when situations of long illness or need for family assistance occur. State support, such as parental benefit or the unemployment fund, is only calculated on the official value declared contractually.
The consequences become even more severe when it comes time to reach retirement age, after a lifetime of work. Final pensions are drastically below the life expectancies of those who have never quoted on the total income received in the company. The entire country is harmed because those who fully comply with the law end up compensating for the millionaire drain of those who circumvent correct taxation.
The authorities’ blind eye
Despite being widespread and public knowledge, these tactics persist repeatedly with the passive collusion of several parties. There is strong criticism of the lack of proactivity and the outdated scrutiny methods applied by the Federal Revenue Service in the field of inspection. The complaint points to a serious failure on the part of the State to seek out million-dollar revenues constantly lost in the unofficial market.
Detecting irregularities depends almost exclusively on sending inspectors to the field, professionals who are scarce in the current public ranks. The aforementioned source explains that there are no automatic computer alerts that immediately compare the excessive weight of daily wages in relation to total remuneration. This lack of resources and advanced IT systems allows for the long-term maintenance of this corrupted system, immune to legal sanctions or fines.
Unfair competition and injustice
The problem goes far beyond the individual relationship between each employer and employee, causing profound distortions in economic statistics and business competition. A considerable portion of the Gross Domestic Product escapes any type of official and transparent registration or accounting in the country’s numbers. Businesses that comply with their obligations face an immediate disadvantage compared to competitors who resort to this illegal engineering of monthly payments. “Part of the country is paying taxes that others do not pay, AT is responsible for this social injustice”, says Gonçalo Rodrigues, President of the Tax Workers Union.
Social Security confirms that this is a general problem and far from being confined to simple corporate employees. The practice also includes members of management bodies, directors and administrators who receive large remunerations disguised in the form of the organization’s operating expenses. Small and medium-sized companies and large organizations use exactly the same tools to avoid paying due state charges.
Proposals for ending the scheme
Combating the payment of salaries through unofficial channels requires an urgent reform of information sharing between public finances and Social Security. Institutions need to approximate their contribution bases and establish a single monthly declaration on all of the citizen’s financial income. Effective coordination would allow automatic data crossing and would drastically reduce the scope for delaying maneuvers and illicit schemes in companies.
Another proposal involves obliging firms to send their complete and detailed accounting invoicing electronically and directly to the State. The judicial system also needs to be more rigorous in the evidence required in cases where thousands of daily kilometers are invented to cover up payments. The Express also explains that relief from the high global tax burden could act as the main incentive for the return of the undeclared economy to the legal sphere.
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