From 1 October next year, all employees in major construction sites will have to register with a special smart card when coming to or leaving from work. This will help to better detect tax fraud, including the payment of envelope wages, and ensure that only people who are correctly registered for employment and, in the case of foreigners, only those registered in the relevant register or database, work on construction sites.
The information system for the subcontracting chain and working time, which makes such supervision possible, will be created by Wisercat, an information technology company, in cooperation with Helmes, one of the largest companies offering IT solutions in Estonia.
“For a construction company and a customer, the information system is a tool that gives an overview of the companies operating on the construction site, as well as provides assurance that only registered employees work in the subcontracting chain,” says Siim Tamm, project manager from the Tax and Customs Board. “The information system will provide the Tax and Customs Board with opportunities to identify problematic construction sites during automatic checks and focus on them to carry out better targeted surveillance.”
“We believe that the introduction of these changes will help increase tax receipts and reduce envelope wages, thereby bringing transparency and fair competition to the business climate,” says Vassili Ljahhovets, member of the management board of Wisercat Estonia. He explains that, in addition to significantly improving the efficiency of the supervision of labour taxes and foreign workforce, the system will also help to reduce the administrative burden and duplicative activities of the parties. “Consolidating information in one electronic environment should also give the authorities a direct overview of the subcontracting chain of construction sites, the persons enabling and performing work and the time actually spent on the site,” Ljahhovets adds.
Tarmo Kiivit, partner of Helmes, adds, “The Tax and Customs Board has been one of the major leaders of the Estonian e-state, with an inspiring vision of being one of the most efficient service providers in its field in the world. As the Helmes Group has a long experience in creating software solutions in the field of taxation, we are very happy to participate in this project, we can apply our experience to the benefit of the Estonian e-state.”
According to the Tax and Customs Board, more than 20 million euros of tax money is lost from the construction sector per year in Estonia, nearly half of which is the tax loss on envelope wages. The information system also simplifies the supervision of the Police and Border Guard Board, which checks the legality of foreign workers, and the Labour Inspectorate, which monitors compliance with the requirements of the working environment.
The cost of the information system for the subcontracting chain and working time is 1.16 million euros, including VAT.