Working in the black – working without declaring the income – was cut in half during the Covid-19 epidemic, according to research from the university of Leuven.
Working in the black – effectively, tax evasion – was often jokingly referred to as Belgium’s national sport. The practice has been on the wane, however, since 2004, with the introduction of service cheques, which offer a cashless method of payment for all kinds of home help: cleaning, ironing, shopping, transport and so on.
The employer, or householders, buys the cheques at the legally-set cost (currently €9 for one hour of work), and uses them to pay the employee. They in turn can redeem the cheques at the agency which employs them. Tax is paid at source, and the money received by the employee is their own.
In the meantime, the employer can set off the service cheques against their own tax bill, cutting the cost on average to €6.30 an hour.
According to the KULeuven research, led by professor of economic sociology Stef Adriaenssens, the cheques have served their purpose in reducing the amount of tax evasion in the sector concerned.
“We see that undeclared work has really decreased a lot thanks to the service cheques,” he said. “That is what our study clearly shows. The introduction of the service vouchers has probably led to a halving of the black market.”
The conclusion is tentative, simply because of the nature of tax evasion. And undeclared working still goes on, even in the housework sector.
“That mainly happens with people who have been employing someone for a long time to clean,” Adriaenssens told the VRT. There is often a good relationship between both parties, ensuring confidentiality, and employers are satisfied with the work delivered and may not wish the worker to leave if they insist on using service cheques.
But what the state gains in tax paid, the system of service cheques has costs of its own. In Flanders alone, the research shows, the Flemish government paid €1.1 billion for the system.
Nota bene: The regional government do not recoup the income tax paid through the system, which goes to the federal government, and only comes back to the regions indirectly.
“That’s a lot of money. But of course there are also a number of advantages: reducing undeclared work, offering jobs because there are 90,000 people who find a job in the service voucher sector. It remains an expensive story, but the effectiveness is really great,” Prof. Adriaenssens said.