Billions Go Past the Budget...

The Deputy Minister of Labor and Social Protection Idris Isayev acknowledged the existence of large-scale illegal employment and "gray" salaries in Azerbaijan. Speaking a few days ago at the presentation of the Global Report on Wages of the International Labor Organization in 2016-2017, the senior official said a real increase in the share of wages in the population's income by 5%, legalization of 2.27 billion manat of wages means additional taxes of 270 million manat and 570 million manat deductions for social insurance. This will increase the minimum wage by 10% and the basic part of the pension by 30%.

According to him, a number of employers continue to resort to "gray" wages and violate the labor and social rights of workers. Unfortunately, hired people agree with such conditions, not realizing that, thereby, they are deprived of all forms of future social security.

The data cited above testify to the scale of the "gray" economy in Azerbaijan and the great amounts that go past the budget. The Ministry of Labor and Social Protection of the Population unsuccessfully struggles with this phenomenon, having introduced an electronic system for concluding labor contracts a couple of years ago, which, in fact, was supposed to solve the problem of informal labor relations. But this did not happen.

As the head of the League for the Protection of Workers' Rights Sahib Mammadov notes, the law provides for criminal punishment for double bookkeeping and tax evasion, but in practice the law does not work, because employers prefer to pay a fine to controlling bodies rather than to indicate real wages in their accounting documents. Impunity is facilitated by the fact that the country observes a moratorium on various kinds of inspections of entrepreneurs.

According to official data, today in Azerbaijan there are 4.7 million able-bodied people. At the same time, only 33.4% of these people work legally under labor contracts and receive salaries, while the rest are for hire. Approximately 600,000 citizens work in the private sector. This is trade, construction and household services. According to rough estimates, the pension fund annually loses more than one billion manat.

The head of the Center for Sustainable Development Studies Nariman Agayev says salaries in envelopes are received not only by those employed in the private sector, but also by employees of state structures. But the origin of this money is no longer connected with production, the revenues from which are adjusted. If civil servants receive monthly unofficial allowances, this is either a misappropriated part of the budget allocated for the acquisition of inventory, the implementation of projects, etc., or bribes.

However, while after the devaluation of the national currency the volume of “envelope wages” in the ministries declined, in the private sector this practice continues. Simply now, the sums of “gray” salaries differ from previous years.

According to the expert Akram Hasanov, “an envelope salary”, or undeclared income is associated with the criminalization of the economy, which uses various schemes of tax evasion, business pressure, and bribes. Today almost every second employer hides part of the salaries of his employees from taxes.

“How many Azerbaijani citizens receive money invisible by tax officials? Really no one knows. Many employers apply the practice of gray wages, saving on social benefits and on ensuring safe working conditions. As a result, the employee loses not only a number of the most important social rights, but also the opportunity to fight for their restoration,” Hasanov said.

What is the way out? Experts propose, first of all, to legalize the economy and make it free, and further reduce the tax burden on employers, eliminate bribery and the vicious practice of taxing businessmen by the tax authorities and the executive power. The tasks of the state are to improve the business climate, to ensure efficient and decentralized regulation of the labor market, and not to struggle with business that is trying to survive in the crisis.--0--