Working in the black

Most infringements by far took place in the catering trade – hotels, restaurants and bars, as well as take-aways – which accounted for 46% of all “positive checks”. Those are cases where inspectors determined that a breach of employment regulations took place.

The catering industry recently received a major concession from the government – the reduction of VAT from 21% to 12% – which was supposed to be countered by an effort on the part of the industry to reduce zwartewerk, or black work, the term used to denote illegal and undeclared employment. The catering industry openly admitted it would not, with only a few exceptions, be passing on any savings to the client. Instead, they would consider the lower rate of VAT as a way to decrease expenses. Employers in catering, as in every other sector of the economy, complain that high social charges in Belgium work against employment. The contributions an employer has to make towards an employee’s social insurance are a disincentive to taking on staff. Employing people in the black is generally seen, like tax avoidance, as a victimless crime: the boss gets a worker, the worker gets a job, and only the treasury is left wanting.

Who “pays” for illegal workers

In fact there are a number of victims: businesses who stay within the law suffer from unfair competition; the resources of the social protection safety net are underfunded; the worker is left unprotected if he or she gets ill or has an accident at work. Finally, diners are unwittingly paying to be served by staff who may have no training, working for an employer who cares little about the law, an attitude that may extend to health and safety rules.

It can even be claimed that black work in the catering industry forms one of the tentacles of organised crime. It is well known that restaurants are the favourite workplaces for placing illegal immigrants who have travelled here through the hands of human traffickers. Trafficked immigrants work long hours, sleep on the premises in often miserable conditions and are often prevented from leaving on pain of being turned over to the authorities.

Defenders of the trade, however, point out that were it not for the widespread avoidance of social charges, not only would there be far fewer restaurants, but those that remained would be considerably more expensive.

Part of the deal on the reduction of VAT was the introduction of “intelligent cash registers”, which would make black work a thing of the past. Waiting staff would have to log in, and the cash register would keep track of hours and transactions. While some staff – dishwashers or cleaners, for example – are not directly linked to the cash register, restaurants would effectively no longer be able to take in black income, meaning it would be all the more difficult to make black payments to staff. The computer logs would be open to the scrutiny of social inspectors at any time.

Not surprisingly, parts of the catering industry are reluctant to introduce smart cash registers, which are admittedly expensive and which will have an even greater effect on future earnings than the price alone. The system is not expected to be in effect before 2013.

Industry representative Horeca Vlaanderen supports efforts to combat social fraud, according to its director-general Luc De Bauw. Most employers would prefer to do everything legally, he says, but circumstances have made it difficult.

“Black work comes to the surface mainly at peak moments,” De Bauw explains. “Right now, for example, it’s terrace weather. Businesses have to find extra staff quickly to serve the increased number of clients, and that’s when we discover that occasional workers are ready to lend a hand but don’t want to be taxed in the normal way.”

If there were more flexible rules for occasional workers, he said, black work in the catering industry would be less of a problem.

www.meta.fgov.be/siod

Signs of social fraud

How would you know if your local trattoria or brasserie were involved in illegal employment activities? Here are two tell-tale signs:

• Good deals for cash. Some restaurants will let you pay for lunch with a credit card but make you pay cash if you come back for dinner. That’s because business people at lunchtime often eat on expenses and require a receipt. That makes it impossible for the restaurant owner to avoid declaring the income. In the evening, however, customers are less demanding. If the diner pays cash and nothing goes through the till, the tax-man need never know.

A fixed-price menu might also be offered at an attractive price, but only for cash. One restaurant even offered a free bottle of wine to couples who paid cash. The trick of operating separate prices for cash is not confined to the restaurant trade; a hotel might offer low-price midweek deals, cash only. Most readers will have come across this deal also being used by garages, builders and even white-collar professionals like doctors and lawyers.

• Lack of VAT receipts. Every customer has the right to a VAT receipt, which ought to be proffered without being asked for. In reality, the opposite is usually true; you can have one if you ask for it, though the staff may have trouble finding the receipt book. Every official receipt written out is money that has to be declared. Most middle-sized restaurants can avoid a lot of tax by failing to declare income. Larger restaurants or chains don’t have the opportunity or don’t bother taking the risk. Snack bars and the like are taxed according to a forfeit and don’t gain from you paying cash.

In restaurants in business or office areas, on the other hand, where most diners are on expenses and where the VAT receipt is the rule rather than the exception, it’s possible for customers to take their pick of the VAT receipts left lying by those who don’t need them. Professionals eating in the Schuman area of Brussels know this: you might eat lunch for €50 but leave with a found receipt for four diners worth €200 to turn in on an expense report.

Social Fraud in Figures

35,741 inspections carried out in 2009 by the SIOD, up 13% on 2008
€68 million in unpaid social security charges recovered
6,755 offences discovered, slightly fewer than in 2008
8 in 10 of the offences discovered concern black work
33% of the checks concerned the construction industry, which delivered fewer breaches (17%) than average (26%)