When talking about the labour market certain themes are avoided by both employers and employees. One of such things is so-called ‘envelope salaries.’ That is to say, cash-in-hand work. The statistics are striking. Unofficial, or off the book, salaries are not rare cases. Approximately half of the Lithuanian labour market receive their wages “in envelopes”, ekonomika.lt reports.
This data was disclosed by the job search portal CVbankas.lt which conducted a survey of a number of individuals in employment in Lithuania. Despite 55 percent of those surveyed claiming they had never received an “envelope salary” the rest admitted they have encountered such situations. Another tenth admitted receiving “envelope salaries” regularly.
The opinions of those in receipt of such clandestine salaries differ greatly. Some claim it is an unfavourable tendency of the labour market which does in fact have negative consequences on both employees and the Lithuanian economy. According to those surveyed by CVbankas.lt it is necessary to take into account the social guarantees given to those who declare their official income and pay taxes. It is also crucial for those in the labour market to critically assess individual employment situations in order that employers do not abuse their positions by forcing their employees to accept “envelope salaries.”
Another group of respondents regarded “envelope salaries” as positive. According to them it is better to receive a larger sum of money, even if through unofficial channels, and a smaller official salary or none at all. This is largely due to their own poor financial circumstances. According to the respondents’ opinions, employers as well as employees are forced to pay illogical taxes. Both subsequently believe it to be more beneficial to receive an unofficial income than to pay the difference in tax.
The final group of respondents saw both positive and negative aspects to such unofficial salary arrangements. As a result, they neither justified nor condemned those who pay and those who receive “envelope salaries.” Unofficial salaries exclude one from social security guarantees but in turn allow the individual to earn more in comparison to official channels. However, this final group of respondents admitted they wouldn’t agree to provide labour in exchange for an “envelope salary.”
Edited by Rachel Croucher
I think the problem is endemic across Europe; especially where workers are 1) taxed heavily. 2) Critical of their government’s fiscal irresponsibility. 3) disagree with the way in which their taxes are spent; wars for instance. Such ‘rebels’ see a non-taxed income as being akin to the exploits of Robin Hood.
I once asked the head of Britain’s largest building trades association why the government was reluctant to crack down on it. He said pressure had been applied on parliament but they backed off: The reason of course; no one elects politicians who threaten their income.
In many cases, especially the self-employed sector, being cash-in-hand is not a bonus, it is necessity. All do it, including the politicians. Likewise in Spain and it can be presumed most other countries.
I seem to recall reading that the black economy / unpaid tax in Malaga, far from being a major sized city, was so large it alone would get the government off the hook. They offered an amnesty if the culprits coughed up just 10 percent of what they had dodged. As far as I am aware it was ignored. Solution; a fairer tax system.
If the social democrats would come to power and be able to introduce progressive taxes, we would really see a sharp increase in these “envelope salaries”. Much better to keep the low 15% tax and instead introduce severe punishments for employers and employees who don´t pay.