PIE: The public finance sector loses PLN 17 billion a year due to the 'under the table' wage

The value of the wage realized "under the table" reached PLN 34 billion, ie 1.6% of GDP in 2018, according to the report of the Polish Economic Institute (PIE) "Scale of paying under the table in Poland". The public finance sector loses PLN 17 billion annually in this respect, the Institute estimates.

"Paying under the table - which occurs on a huge scale in Poland - has serious economic consequences. It distorts competition in the market, making honest enterprises worse off than companies using unfair practices. It also results in a significant loss of revenues of the public finance sector, the losses of which amount to over PLN 17 billion. PLN annually - this is comparable to the VAT gap (PLN 19 billion) or the CIT gap (PLN 22 billion) in Poland. From the point of view of employees, paying under the table reduces their social security, as no contributions are paid on the unofficial part of remuneration. some benefits, such as sickness and maternity benefits, and future pensions of employees are underestimated," - said Jakub Sawulski, head of the PIE macroeconomics team,.

PIE emphasized that the payment of part of the remuneration under the table concerns mainly employees who formally obtain low incomes, as this phenomenon is concentrated in the part of the distribution of remuneration equal to or close to the minimum wage.

Paying under the table also makes the official amount of the average salary given by the Central Statistical Office underestimated by about 5% (PLN 240 in 2018).

"Paying under the table" occurs in micro-enterprises, where the percentage of people receiving a share of this form of remuneration is 31%, compared to 11% in enterprises with 10 or more employees, the Institute reported.

Paying under the table is most common in industries that provide small services, such as accommodation, catering, beauty, entertainment and recreation. 35% of entrepreneurs in these industries believe that at least 20% of wages are paid under the table, and in total more than half indicate the occurrence of the phenomenon of paying under the table at any scale. Another industries in which paying under the table is relatively frequent are trade and construction. This phenomenon is noticed by more or less every second entrepreneur from these sectors.

PIE reported that one of the main reasons for "paying under the table" is high taxation on low wages.

"While the tax wedge for medium and high wages in Poland is moderate compared to other countries, for people earning half the average wage it is close to 40%, which is the sixth highest result among 36 OECD countries. in order to avoid tax-related costs "- summed up Sawulski.

Source: PIE and ISBnews