Conference: Establishment of Hidden Economy Task Force in Republic of Macedonia

On 19 June 2015, the Center for the Study of Democracy and the Center for Research and Policy Making held a conference on developing a hidden economy task force in Republic of Macedonia.

Mr. Ruslan Stefanov, Director of the Economic Program at CSD suggested that governmental institutions reach consensus on hidden economy issues and express their joint view in the framework of one single body. He stressed that the hidden economy will be a policy concern in the decade to come. In that context, the role of the hidden economy task force will be to consider and promote not only punitive measures, but also motivational policies and incentives that can encourage positive economic growth.

Ms Marija Risteska, Director of the Center for Research and Policy Making reinforced the task force idea as a knowledge exchange platform, as well as a nucleus for encouraging cooperation, generation of recommendations and measures that can be forwarded or presented to the Economic and Social Council at the Ministry of Labor and Social Policy (MLSP).

Mr. Emil Shurkov, Analyst at the Center for Research and Policy Making, stressed that the phenomena affects the most vulnerable groups such as the young, unemployed, and the poor. He presented an analysis of the policies applied in Macedonia and data from a survey on the hidden economy. According to the survey, a third of the employed receive “envelope wages”, and more than half of the employed have “contracts with hidden clauses.” Education plays a significant role in determining the share of workers having written labor contracts. For instance, only 44% of the workers with primary education have a written contract. This share increases to 81% for secondary and 93.5% for tertiary education. Startlingly, these figures are even more dramatic when the ethnic background and distrust in the policy-makers is taken into consideration.

Ms Snezana Denkovska, Director of the Chamber of Crafts, emphasized the importance of the Ministry of Labor and Social Policy (MLSP) and its inspectorates, and its key role in providing authority and operational viability of the Hidden Economy Task Force.

Mr. Rade Nenadic, Director of the Employment Agency (AVP) noted that it is very easy and inexpensive to register a company in Macedonia, nevertheless, the laws that govern the defaulting, bankruptcy and closure of companies are a huge obstacle to the formalization, resulting in entrepreneurs having no incentive to invest. Furthermore, the employer cannot be forced to stop the practice of cashing out envelope wages, because the Public Revenue Office (PRO) does not have the legal jurisdiction to interfere in these cases. In this respect, collaboration between PRO and MLSP is crucial to tackle the problem of the “envelope wages”.

Ms Slavica Kiroska from the Public Revenue Office (PRO) discussed how motivational campaigns are used by the PRO to encourage companies to register their economic activity. For example, unregistered subjects are given a certain amount of time where they can legally register their activity without any fear of legal prosecution. The action plan has a methodology of how to evaluate the effectiveness of its activities, and it is a good framework for tackling some aspects of the hidden economy in Macedonia.

Ms Biljana Chklamovska, legal expert at the Union of Independent and Autonomous Trade Unions of Macedonia (UNASM) stated that despite the existing various active employment measures, the share of undeclared workers is still high. She suggested having a smaller, more compact and flexible task force, which will increase its efficiency. Ms Chklamovska suggested a government-funded awareness campaign pioneered by the task force that could potentially reach most, if not all of the citizens in the Macedonian economy.

Agenda (Adobe PDF, 603 KB, in Macedonian)

Presentation by Mr. Emil Shurkov, Analyst at the Center for Research and Policy Making (Adobe PDF, 860 KB, in Macedonian)

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