Penalties for those avoiding obligations

Tackling social dependency with stricter tax legislation
Tackling social dependency with stricter tax legislation



Employees to pay penalties for receiving ‘grey’ salaries

While the authorities work on the coming Decree, citizens of Belarus cannot help but be worried if they will be negatively affected. The Minister for Taxes and Duties, Sergei Nalivaiko, notes that there is a difference between those who are simply ‘asocial’ and those who ‘engage in illegal business, being paid cash to avoid paying taxes in full’.

Those currently hiding part of their income will need to ponder whether to make their earnings legitimate, paying the necessary taxes, or whether to be ready to pay their fine plus a penalty of 20 basic amounts. Those failing to pay contributions for six months will need to pay a yearly fee (the sum yet to be announced).

Of course, the problem is long standing, with 6-7 percent of enterprises thought to be avoiding paying all employees legitimately, to avoid paying tax contributions on their behalf. In a single year, over a thousand employers are generally brought to justice, indicating that many more go undetected. One survey found that 8 percent of respondents confessed to receiving ‘grey’ salaries. Meanwhile, 18 percent supplement their official wages with ‘grey’. Spheres prone to such deception are service centres, building works, truck haulage firms and computer services, drawing the attention of taxmen.

The Ministry for Taxes and Duties, together with the Ministry of Labour, the Economy Ministry, and the Finance Ministry, has prepared a Decree ‘On Individual Measures to Prevent the Payment (Issuance in Kind) of Income Without Accounting’. The document envisages release of culpability for workers who inform the authorities of receiving ‘cash in hand’ payments, to encourage disclosure.

Where ‘grey’ salaries are proven, employers will become liable to make good their error, paying 34 percent of unaccounted sums to the Social Protection Fund, plus 20 percent of the sum of these fees and unpaid income tax. Employees will be due to pay tax on all undeclared income but no additional penalties or sanctions. Individual entrepreneurs will pay a fine of between 2 and 50 basic amounts, while companies will pay somewhere between 5 and 100 amounts. Officials who have sanctioned such payments will also be held to account. Moreover, ‘grey’ wages will be equated to income, obliging the employer to pay tax on the amount.

Those working ‘illegally’ — as tutors, hairdressers, cleaners, manicurists, nannies, and masters of weddings and jubilees (the full list is given in the Tax Code) — will pay a penalty of five times the tax officially due if they fail to declare their income.

In order to avoid misunderstanding, the Decree will allow citizens to prove payment of taxes. The Minister for Taxes and Duties tells us, “Citizens may show documents to confirm their payment of tax; arguments will be heard. Where tax inspectors have made a mistake, citizens will be able to make a court appeal.”

By Maria Drukova

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