(12 November 2013) On 16 October 2013 the S&D group of the European Parliament hosted the conference Countries of Convenience: Stop Tax Evasion and Social Dumping relating to European Parliament Resolution on the Fight against Tax Fraud, Tax Evasion and Tax Havens, which was presented by the rapporteur Mojca Kleva Kekus during her introductory remarks of the conference. Summary of the resolution’s content.
A number of speakers presented cases that highlighted the connection between tax evasion and social dumping facilitated by non-enforcement of the Posting of Workers Directive (PWD).
Eduardo Chagas, General Secretary of the European Transport Federation (ETF) illustrated the situation in the transport sector where so called “innovative” employment schemes allow companies to evade taxes and wages while maximising revenue. This is done by choosing “tax havens” to set up letter box companies, hiring workers in the “wage havens” of the EU11 and operating in “revenue havens” of the EU15 thereby maximising profits at the detriment of worker’s incomes, national budgets, as well as fair competitors that are unable to compete under these conditions. In one example Romanian drivers attested in an interview that they had been recruited via an employment agency in Romania but on behalf of a company based in Cyprus using lorries registered in Cyprus and operating mostly in the Netherlands, Germany, France and Belgium. The drivers pointed out that they never drove for this company in Romania, or Cyprus. The illegitimate profits of companies such as this are further increased by forcing the drivers to disregard laws on safety and labour rights with the consequence of deteriorated working and living conditions throughout the duration of deployment in the host country often lasting for as long as 12 weeks at a time, working 12 hours per day for a 300 € monthly salary, divided between 30 % of fixed revenue and 70 % of per diem – the 30 % being the only part taken into account for the social employers’ participation. The workers don’t have the right to take breaks and aren’t entitled to medical care.
This kind of practices are take place in total disregard of Article 6 of Rome Treaty and are exploiting people in a fashion very similar to slavery.
Another example took place in the shipping sector: ferry workers who were employed by a company based in a UK tax haven (such as Jersey) and had paid social contributions throughout their careers didn’t received any kind of old age pensions once they reached the age of retirement, and had no way of proving that the contributions were deducted from their wages.
In January 2011, 350 Polish drivers called for a strike which lasted for 18 days, against their French employer who refused to apply the collective agreements and to improve the wages, that were frozen for 4 years. The company reacted by intimidating the workers and firing 20 of them, but the support of ETF could finally lead to an agreement.
Swedish journalist Anna-Lena Norberg described the case of the Atlanco Rimec Group, which uses its subsidiary companies to operate in EU 15 countries, using workers hired in the EU 11 and abusing the posting of workers provisions to avoid taxes and social contributions in both home and host countries. In some cases Atlanco Rimec actually deducts these contributions from the salary but keep them to themselves. Other companies especially ones registered in Poland force their employees to become “bogus” self-employed in order to avoid paying social contributions.
ETF has fought hard against the exclusion self-employed drivers from the scope of the Posted-Workers directive, and insists that coverage has to be universal to be effective.
Sam Hägglund, General Secretary of European Federation of Building and Woodworkers (EFBWW) illustrated what he termed the “cheap labour business model”. This model capitalises on the fact that EU countries allow letter box companies and illegitimate posting of workers operations to flourish. Companies then take advantage of the lack of enforcement mechanisms to deprive workers of their wages and contributions. In practice the posting of workers prevents states from reinforcing employment and labour standards, or their circumvention through bogus self-employment.
Solidar spoke on behalf of tax justice and explained that tax evasion and social dumping are two sides of the same coin. This results from the fact that social dumping is essentially depriving social welfare systems of funds that have to be compensated through other means, often through revenue collected from taxes, or by reducing welfare and pension provisions. Solidar also raised concern at substituting the income lost through corporate tax cuts and corporate tax evasion by passing the costs on to average citizens by raising VAT. Solidar calls on policy makers to make use of the laws and solutions already in place by properly enforcing them.
Indeed, 5 years of discussions on that matter at the European Council have lead to the decision to formulate 30 concrete proposals for action against tax heavens and tax evasion (for example, the “country by country reporting”). But yet there is no visible application of that decision.
Finally, they call on political parties to include the fight against social dumping and tax justice in their respective manifestos for the upcoming election.
Tax evasion, fiscal dumping and social dumping are closely linked. The equivalent of 7 years of European budget is lost every year in tax evasion!
The main challenge lies in the non application of the already existing rules, and the European Commission has a large responsibility of this situation: the Fundamental Rights Charter has been adopted, but it is not reinforced. Many Ministers are inconsistent in their rhetoric when they speak to the Council or to their own Parliament. Speakers called for alliances between trade unions, social movements, progressive politicians, to promote a stricter monitoring and sanctioning system.
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