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analysis 26 Oct 12

Invisible Workers Deprive Kosovo of Millions in Taxes

Data show 30,000 fewer people paying taxes and into pensions than census indicated are in work. If true, some 12 per cent of the workforce are working informally, depriving the state of crucial taxes.

By Jeton Musliu
BIRN
Pristina

Some 30,000 employed people do not appear to have registered in Kosovo’s tax and pension systems, potentially depriving institutions of some 20 million euro a year, Prishtina Insight can reveal.

The figure arises as a discrepancy between the 2011 census and the latest report from the Kosovo Agency of Statistics, published in September.

The census found that of the 508,100 people eligible to work, 280,454 citizens identified themselves as employed.

All of those should thus be registered the tax and pension systems, regardless of income, but the Kosovo Pension fund lists only 251,510 people, while the tax administration has 250,305.

If these data are correct, another 29,000 to 30,000 people, 12 per cent of the workforce, are thus working informally.

Officials of the Pension Fund, the Tax Administration, and the Ministry of Labour and Social Welfare said they couldn’t speculate how much these people collectively earn.

But, using as a benchmark the average annual salary of 4,416 euro as determined by the Kosovo Agency of Statistics, their total earnings would approach about 130 million euro.

If taxed, this figure would yield 6 million euro to the state budget and 14 million for the pension system.

Labour inspectors checking:

By law, all employers are obliged to draw up contracts with their employees. The Labour Inspectorate, which works under the Ministry of Labour and Social Welfare, is tasked with enforcing the labour law and verifying whether people are working legally.

Chief labour inspector Basri Ibrahimi says Kosovo’s 50 inspectors have looked into 53,000 employed people. “Around 3,000 were working without documents. This is not a very high figure,” he said.

Based on the sample, it would suggest about 5.5 per cent of Kosovo’s workforce is employed illegally, versus the 12 per cent from Prishtina Insight’s analysis of government data.

Ibrahimi said he believes his agency’s data are a more accurate reflection of the workforce than those of the census.

Tax officials on the case:

The Kosovo Pension fund is aware of a 11.5 per cent discrepancy between the census data and its own number of payees, pension spokesman Jeton Demi said.

But it is impossible to know much uncollected money that represents, he added.

The Kosovo Tax Administration is also aware of  adiscrepancy. “We are aware that there are employees who are not registered, but in all these cases, [the Tax Administration] takes measures for their registration and applies sanctions,” the agency said, in response to Prishtina Insight’s questions.  

It is unclear, though, how the Tax Administration would do this. The Kosovo Statistics Agency is prohibited from helping agencies such as the Tax Administration to identify violators of the law because census data is confidential, Hazbije Qeriqi, spokeswoman for the Office of Population Registration, said.

Qeriqi would not comment on discrepancies between census data and those of the Tax Administration and pension system.

But she pointed out that census data is self-reported. “In the census, data were received from citizens of Kosovo themselves. So, this is a declaration from the citizens of Kosovo” Qeriqi told Prishtina Insight.

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