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Meeting of the Network of economic experts from SEE TU

15 November 2013:

“Trade union approach in understanding the link between tax policies, informal economy and corruption”, SOFIA, 30 – 31 October 2013

Purpose of the meeting was continuation of cooperation among economic experts from SEE TU, discussion about the development of situation in EU, and influence of these events onto the Balkan countries, particularly from the angle of status of trade union and workers’ rights, and the continuation of serious analysis of existing tax systems in SEE countries and link between fiscal policy and informal economy and corruption.
The meeting was attended by economic experts from Albania /KSSH and BSPSH/, Macedonia /UNASM; SSM and KSSM/, Montenegro /CTUM/, Serbia /CATUS and UGS “Nezavisnost”/, Bosnian and Herzegovina /KSBiH/, Croatia /UATUC, NHS/ and Kosovo /BSPK/, as well as CITUB from Bulgaria. The meeting is part of activities within PERC – Sarajevo Office Project, and co-financed by Swedish trade unions LO and TCO, Norwegian trade union LO Norway and resources from Solidarity Fund of ITUC/PERC.

Thematic part of the meeting:

(1) First session, under the title “Development of events in EU and influence of these events onto the Balkan countries”, consisted o presentation by Grigor Gradev and relevant information on latest developments in EU, economic crisis and its use for making some new rules in industrial relations, which is particularly reflected in further increase of unemployment, attacks at labor legislation and collective bargaining, which altogether results in weakening the position of trade unions. Gradev also stated that, there are some positive signals in key economic areas, everything goes so slowly and some improvement of situation and reduction of unemployment in EU countries cannot be anticipated in the near future. The austerity policies may be relaxed in certain countries but not rejected as an approach and will continue to exert a controversial impact on the SEE countries. This is particularly important for shaping their labour market and social policies – often a residual outcome of economic/competitiveness dependence of the region. It is therefore important to know how EU functions, have EU documents at disposal, and the translation of these documents into Croatia language may be used now. Discussions: in reference to the topic of the first session experts talked about economic and social situation in their respective countries, emphasized the problem of huge unemployment which still grows, and they particularly highlighted the examples of currents events related to the amendments of labor laws in many countries, which altogether leads to reduction of workers’ rights, weakening of collective bargaining and position of trade unions. Discussion of experts from Serbia – there are two political options in Serbia: one in favour of EU integration and the other against. Huge unemployment is present, austerity measures and flexibilization are introduced, all to the detriment of workers. A big responsibility lies before trade unions now, and for that reason SSS Srbija and UGS Nezavisnost took single position in response to austerity policies, unemployment, and they also recently signed an Agreement on joint activities on protection of rights in the current Labor law. Expert from Croatia Boris Feis pointed out that the leaving out of and recovery from the crisis is so weak and that economic crisis has a political dimension, and also that the right wing options are getting stronger which is very dangerous.

(2) Second session – presentation about macroeconomic indicators in Western Balkan countries, prepared by Prof. Bruno Sergi, permanent mentor of the Network of economic experts from SEE TU. A large unemployment rate is apparent, especially in Macedonia, Montenegro, BiH, Serbia; economic crisis continues, there are no direct foreign investments, no economic growth that would create conditions for new jobs, no industrial growth, countries in the region are not competitive, programs for reduction of consumption only added to the unemployment, austerity measures are introduced though they produce no positive result in GDP growth. Economic transition in SEE countries was focused only on national level instead of regional perspectives; SEE countries find the bilateral discussion and relations with EU more important than the relations at the regional level; a policies created in these countries in terms of alleged regional cooperation lead to a model of competition towards same markets and same investors, instead of model of genuine cooperation. For that reason is the powerful trade union regional cooperation needed, the smart and integrative policies, and also the trade union experts who are familiar with what happens in their countries. Production is needed, creation of new values, new jobs, and the potential lies in the energy sector, information technologies.

(3) Third session – topic “Positions and recommendations of trade unions for the reform of taxation policies, combating tax evasion, fraudulent forms of tax evasion, and link with informal economy and unregistered workers”, was presented by Martin Hutsebaut. It is apparent that a taxation policies were not well designed in the Western Balkan countries, that there is an expressive practice of avoidance and tax evasion, particularly in the segment of labor relations. Employers often do not register their workers, and for those registered they only pay contributions and tax on minimal salary, which definitively increases the informal sector. In this way those employers who regularly pay contributions and tax for their employees are place in unfavourable and uncompetitive position, resulting in shutting down of some of the jobs or even factories. It is so important to have in place such a taxation system that functions well, as well efficient instruments of control, to balance competition and create good social policy. The work on the reform of taxation policies should be continued in such a way to clarify well what a state ensures for its citizens from the funds collected from taxes, including the transparent spending of those funds. Based on that, it is clear that taxation policy is not merely an economic category and it represents a model of society in which we live.

(4) Fourth session on the topic “Puzzle: Informal economy – economic/social dynamics and trade unions policies” began with the presentation of Grigor Gradev, who pointed out that what is defined as “informal economy” is so vividly present in the countries in transition, and that this phenomenon is also spreading through industrially developed countries. There are different forms and shapes of this type of economic activities and work, that are beginning to consolidate as “usual” standards in business operations and on the labour market. The question is what trade unions can do to give people control over the choice of work and life strategies. The “informal economy” indicates the failure of the “formal economy” to cope with the development challenges so the focus of analysis should be carefully placed to understand the phenomenon and start with its consequences for external interests. Current definitions of ILO and EU do not reflect the complexity of the phenomenon and the need for tailored policy mix in specific economic/social contexts involving a range of economic/financial/legal rules and incentives providing a future for the companies as well as activating/organising the people involved to see their interest in that future and act accordingly. In their discussions, the experts listed the examples of informal/unregistered work in their respective countries, and they also pointed out neither governments nor trade unions have comprehensive strategies and policy to combat this spread phenomenon. To capture the complex nature of realities on the ground in the reports for the project Gradev gave an advice to pursue an approach – a mix of case study methodology and risk analisis: Define the real problem (not only the visible part), identify the actors and stakeholders, the set of interests of each and range of choices available, the contextual factors enabling/restricting respective paths of action (legal/ economic/ financial/ fiscal/ institutional/ procedural, etc.), and probability to extend to other similar cases. This is where the links with corruption/relativity of law enforcement/lack of rule of law in combination with high volumes in cash transactions/cash flows in business interactions and coupled probable “holes” in the accounting regulations and control acquire formative impact on the way ‘informality” has consolidated as an integral part of current economies and societies. The approach will be expected to outline certain “clusters” of companies/patterns of “informality” , their challenges and then search for particular solutions for individual clusters or cases.

(5) Fifth session was related to the previous, and the link between informal economy, fiscal systems and corruption were mainly discussed. The problem of lack of political credibility in SEE countries only make this leaving out of crisis more difficult, it does not attract the foreign investments and conditions for new jobs are not created, there is no industrial production, no new values, laws are not respected, no efficient measures and instruments for protection of laws, fiscal policies and fiscal system are not properly defined, informal economy is growing, and more over, corruption is so present. The situation is alarming, and it is therefore important to develop and professionally design trade union policies at national, but also regional level, on these matters.

(6) Future steps and conclusions: it was proposed to continue with the meetings of Network of economic experts in SEE TU, and that the following meeting (in the first half of 2014) discusses the topic “Social capital”, political and social institutions, and all this aimed at creating new image of trade unions and attraction of new members.

Conclusions:

1. It is so useful for trade unions to have information, follow the situation and understand how EU and its institutions function, and it is so important to monitor the labor policies and social dimensions of policies adopted by the governments in that process. The experience of trade unions from EU member states, particularly the countries in the region that joined EU (Croatia), is very helpful.

2. Macroeconomic indicators and analysis of these indicators in SEE countries suggest that the economic crisis continues, that there are no direct foreign investments, no economic growth that would create conditions for opening new jobs, no industrial growth, countries in the region are not competitive, programs of spending reduction resulted in additional unemployment, austerity measures are introduced which do not provide any or they provide poor results in GDP growth. Thus, the regional trade union cooperation is so important, development of smart and integrative policies, and trade union experts who know what is going on in their respective countries so that they can help in creating trade union strategies that might help to change the current situation.

3. Economic experts will, along with the Network of economic experts, who work within LO Norway Project, draft national reports on the topic of informal economy, however not later than by February 2014 will the first versions be delivered to the ITUC/PERC Sarajevo office. For drafting the national reports on the informal economy, SEE TU experts should pursue an approach – a mix of case study methodology and risk analysis: Define the real problem (not only the visible part), identify the actors and stakeholders, the set of interests of each and range of choices available, the contextual factors enabling/restricting respective paths of action (legal/ economic/ financial/ fiscal/ institutional/ procedural, etc.), and probability to extend to other similar cases. This is where the links with corruption/relativity of law enforcement/lack of rule of law in combination with high volumes in cash transactions/cash flows in business interactions and coupled probable “holes” in the accounting regulations and control acquire formative impact on the way ‘informality” has consolidated as an integral part of current economies and societies. The approach will be expected to outline certain “clusters” of companies/patterns of “informality”, their challenges and then search for particular solutions for individual clusters or cases.

4. In national reports under the point 3 of Conclusions, the experts need to pay attention to link between taxation policies/taxation systems, informal economy, and corruption.

5. It is necessary to continue with these meeting of Network of economic experts from SEE TU, that the following meeting (first half of 2014) discusses the topic “Social capital” and also to talk about political and social institutions, all aimed at creation of new image of trade unions and attraction of new members.

PowerPoint - 3.9 Mb
Comparative analysis of macroeconomic conditions in SEE countries, Prof. Bruno Sergi
PowerPoint - 199.5 kb
Forms of shadow labour activities/ undecared work, Grigor Gradev

this article has been tagged

South-East Europe , Informal economy, shadow economy , Economic reforms , Albania , Bosnia-Herzegovina , Croatia , Kosovo , Macedonia , Montenegro , Serbia , corruption , fiscal policies
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