The ETCB has estimated the tax loss resulting from the payment of envelope wages broadly at 99.8 million euros per year. The estimated tax gap related to the construction sector in particular reaches over 20 million euros per year. ETCB’s project manager Siim Tamm said that the new system offers solutions from the perspective of entrepreneurs, employees, and the state.
“Only people who are correctly formalised to work, of whom the main contractors and the state have a clear overview, and are paid fair wage, may work on constructions. Since the share of envelope wages and VAT fraud is high in the sector, those entrepreneurs who are honest and pay mandatory taxes suffer," Tamm explained.
With this change, starting from October, construction companies can start ordering special smart cards for their employees, the issuance of which will start in November, and then they must also start registering the time spent on constructions. The orders for employee cards meant for builders will be accepted and the cards will be issued by Hansab AS, which won the corresponding procurement.
The data is transferred to the System for Registration of Subcontracting Chain and Working Time (TTKI) created by the ETCB, where information about the customer of the construction service, the construction, the registration system used, main and subcontractors and employees working on the construction is gathered.
“This gives employees a sense of security that their working hours are correctly recorded and that mandatory taxes are paid to the state. "It gives us a dataset on the basis of which algorithms find anomalies and help identify tax risks and direct expensive audit resources to the right places," added Tamm.
Initially, the ETCB plans to emphasise advisory and supportive activities. “We fully understand that this is a new responsibility for entrepreneurs, and it certainly takes some time to get used to it, as with anything new. However, we believe that over time a certain level of skill will develop, and it will become a normal part of work," said Tamm.
Following developments are already worked on and the plan is to make the service more and more convenient based on the practical experience of construction companies and additional interfaces, so that as much data as possible can be pre-filled on the basis of the information found in other registers.
Electronic registration is mandatory in constructions where the duration of construction work exceeds 30 working days and at least 20 people are at work at a time; or the workload exceeds 500 man-days. It affects approximately 1,000 constructions per year.
The registration obligation concerns constructions which are to be built after 1 October 2023 or which are under construction and the expected completion deadline is later than 1 October 2024.
