WITH DEFICIENCES OF VIEW
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On November 4, Marina Covali, Member of the Court of Accounts of the Republic of Moldova (CoARM), participated in the international conference "Moldova goes white: Solutions to encourage the transition to legal work".
The Ministry of Labor and Social Protection and the “Expert-Group” Independent Analytical Center in partnership with the Soros Moldova Foundation organized the event.
Also, the event brought together high-level representatives from public institutions, national and international experts, representatives of the EU delegation, and representatives of the private sector with expertise and interest in this field.
The purpose of the conference was to discuss the necessary policies and effective mechanisms to encourage employers in the Republic of Moldova to give up undeclared work and ways to integrate good practices from EU’s member states. The conference addressed the visions proposed by the Government to encourage formalization, in the context of the EU’s Candidate status granted to our country. Reducing undeclared work is also an objective of the Moldova-2030 National Development Strategy.
The discussions were structured in 4 panels:
- Addressing the problem of undeclared work through combined, balanced, but at the same time ambitious policies\
- Encouraging the transition to legal work in agriculture
- Strengthening the capacity of the State Labor Inspectorate to detect undeclared work
- Government financial incentives to promote legal work
The participants discussed about illegal work and the policy commitments developed by the Government to make this problem more efficient, encouraging formalization in agriculture and introducing vouchers and contributions for casual work in agriculture, Latvia's experience before joining the EU and incentives for the legalization of under-declared work, etc.
In this context, the Court of Accounts carried out in 2018, the compliance audit regarding "Salary declarations and payments to the National Public Budget (NPB) and the impact on the citizens' social rights". Thus, the regulatory norms were analyzed and the mechanisms established to monitor the calculation, payment and compliant reporting of salary payments were evaluated and, respectively, payments to the NPB by economic agents involved in the capitalization of capital investments, especially those financed from the state budget. More than 300 contracts worth 1 billion 150 million lei and about 3000 minutes of work execution by contractors and subcontractors were verified. The audit established that the economic agents did not comply with the legal provisions, not declaring payments to the budget, compared to the data reflected in the minutes of the execution of the works. Respectively, for the undeclared and unpaid payments to the budget in the amount of 4.3 million lei during the audited period, the non-declaration of labor remuneration of about 10 million lei, which represents the possible salary "in the envelope", was correspondingly involved.
The extrapolation of these circumstances for the total value of investments and capital repairs, denotes the possible non-declaration of employees' salaries by the economic agents and the possible loss of income to the NPB in the amount of 327 million lei, which would represent contributions and income tax. Respectively, these circumstances denote the possible payment of the salary "in an envelope" in the amount of 500 million lei.
The "envelope salary" phenomenon affects both the economy and society as a whole, having a negative impact on both the employer and the employee. The legal rules regarding the full declaration of the employee's salary by the employer are intended to ensure the protection of their rights, as well as the calculation and collection of income within the NPB. Consequently, employees working outside the legal framework or receiving "salary in an envelope" are subject to the risk and consequences of not securing the right to assistance and social protection.
