Grey economy issues now receiving much attention

Helsinki (29.11.2010 &#;8211 Juhani Artto)

The grey economy has now become a very real issue in Finnish politics. This may be seen as a reaction to the recent studies that indicate a rapid growth in the grey economy, with all its attendant malignant implications for society as a whole and in particular for all those companies operating legitimately and their Finnish employees.

On November 9 the Ministry of Employment and the Economy set up a task force to appraise how the present administrative tools work in tackling the grey economy.

According to the Minister of Labour Anni Sinnemäki, a central issue on the task force's agenda is to prepare amendments to the Act on the Contractor's Obligations and Liability when Work is Contracted Out (pdf).

"In improving the Act the most important goal is to increase the responsibility on the contractor throughout the entire subcontracting chain", Sinnemäki says. "In most cases the grey economy remains hidden within long subcontracting chains. It is not an easy question to deal with but already several municipalities have begun to apply such responsibility on the entire subcontracting chain", she argues.

This is exactly what the trade union movement has been calling for (in point of fact it has been most vigorous in this demand) in the last few years. The task force is due to finalize its work by the end of March 2011. As the next Parliamentary elections are due to be held on 17 April 2011, this means it will fall to the next incoming government to address the eventual proposals of the task force. The task force has representatives from the labour market organizations.

Up until now the Confederation of Finnish Industries EK has been decidedly lukewarm to the idea of increasing responsibilities on companies that use subcontractors. Instead EK has been in favour of proposals to employ more inspectors. The unions are also in favour of more inspectors but without a significant tightening of the Act (on the Contractors' Obligations and ...) not even by doubling the number of inspectors would bring the expected results, union sources assert.

On November 17 the opposition (in its interpellation or confidence motion in Parliament) called on the Government to combat the grey economy more effectively. Two days later the government won the vote of no confidence. In the debates prior to the vote Prime Minister Mari Kiviniemi assured members that action against the grey economy is one of the most important items on the government's agenda.

Jyrki Katainen, the leader of the Conservative Party and a candidate to become the next Prime Minister, has published his own list for improvements needed in combating the grey economy. His list mainly consists of more resources and rights for the authorities. But, unfortunately, he is adamantly opposed to the proposal that national union organizations should be given 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.

From 1 April 2011 reverse charge of VAT will be applied in the construction industry. This has been an important demand of the trade unions. The construction industry employer association has opposed the reform, referring to increasing administrative work for the main contractors. The state’s tax revenues are set to increase by about EUR100 million due to the reform.

Read also:

SAK publishes a long list of initiatives to tackle grey economy(02.11.2010)

Union: Laws Insufficient to Protect Foreign Workers (Yle News 12.11.2010)