Contractors will be required to register construction workers electronically from 2020 to keep track of on-site personnel, crack-down on illegal payments, and combat exploitation of migrant workers in a move which could see €5.7 million generated in tax each year.
The Ministry of Finance plans to make a draft amendment which would come into effect in 2021.
It will mean general contractors will be required to provide access to larger construction sites where each employee entering the site will be electronically registered. The general contractor will need to register all employees and subcontractors in advance. Subcontractors, in turn, would be obliged to register their employees and their subcontractors.
The ministry believes an electronic registration system would allow the Labor Inspectorate to easily monitor occupational health and safety requirements and for the Police and Border Guard to better monitor the presence of foreigners in Estonia. The Tax and Customs Board would also be able to use the data in its risk analysis and initiate tax checks if needed.
The authors of the amendment state the obligation to register workers should be introduced if the estimated time of work is 30 days or more, if the workforce is at least 20 people in size, and if the workload exceeds 500 man-days.
The company would be expected to bear the costs itself when using the system which the Tax and Customs Board estimates could be up to €1,000 a month, plus three euros per person.
In addition, when implementing the new system, public authorities should make different IT investments in order to link the data to their own systems, which preliminary estimates suggest could cost up to €1.2 million.
The expected increase in tax revenue is estimated by the Tax and Customs Board to be approximately €5.7 million per year.
The estimate is based on the assumption that a reduction in unregistered labor will see and an increase in the number of construction workers whose wages and taxes are declared. This is also based on the assumption workers are paid at the average wages in the construction sector.
If successful the draft amendment states it could also be expanded to other sectors such as metalworking. However, voluntary use, irrespective of the sector of activity, could be offered to companies immediately upon completion of the system.
Currently, Finland, Sweden and Latvia all have a requirement to register workers and their working hours on major construction sites.
In all the above countries, smaller construction sites are exempted from the registration requirement. However, the threshold from which workers must be registered on a construction site varies greatly from country to country and is generally linked to the cost of the construction site.
Editor: Helen Wright