Conference Proceeding

ECONOMIC AND SOCIAL CONSEQUENCES OF FICTITIOUS TRADES IN THE SLOVAK REPUBLIC

Sika, Peter

2024

Overview

The Slovak Republic has a high proportion of so-called fictitious tradesmen on the labour market, as evidenced by data not only from Eurostat, but also from the Social Insurance Institution. According to statistical data, the number of fictitious tradesmen in Slovakia has increased over the last ten years from 84 thousand to almost 110 thousand. The exact number cannot be determined, but there are ways of estimating it. According to the profesia.sk portal, most job offers indicating the employment of fictitious tradesmen are in manufacturing, transport and construction. As tradesmen pay 6 times less tax and tax payments on the total price of the work for the first year of the trade and 2.3 times less for the following years of the trade, the budget of the Social Insurance Institution as well as the state loses significant sources of revenue. The benefits of the so-called bogus trades are exploited by companies in the form of reduced levy obligations, but employees lose their rights to protection and, at the same time, the adequate amount of future pension benefits as well as benefits from the social security system. The aim of this paper is to examine the reasons and motives for the use of 'bogus trades' and to try to identify measures that will eliminate the use of bogus trades and contribute to a fair level of pension benefits. A Slovak fictitious tradesman who pays minimum contributions is entitled to a minimum pension under Slovak legislation, even though the amount of the pension will not correspond to the contributions paid. This has implications for the fairness and sustainability of the pension system.

• Publisher: Varazdin Development and Entrepreneurship Agency (VADEA)
• Subject: Employee benefits / Employees / Employment security / Health insurance / Income taxes / Insurance / Insurance agencies / Labor market / Legislation / Self employment / Social security / Taxation