"Envelope wages are the most widespread type of tax evasion in Estonia, where resulting lost tax revenue amounts to €80 million per year," Õun said in an interview on ETV morning program Terevisioon on Friday.

According to the tax board, lost tax revenue in construction alone totals some €20 million per year.

"In the case of one in four construction companies, our risk analysis points toward envelope wages," Õun said. "Honest companies have a difficult time competing in such an environment."

According to the MTA official, Estonia is the only country in the region that does not require the registration of employees directly on the construction site level.
The tax board finds that the expenditure made for the registration of people on site at a limited-access construction site should be around €1,000 per month in size for a single contractor, and that this should be done electronically.

The MTA, the Police and Border Guard Board (PPA) and the Labour Inspectorate are interested in combating VAT evasion, the illegal use of foreign labor and the payment of envelope wages in the construction sector. A new plan dedicated to this fight will require all bigger construction sites to register anyone who comes on site and submit information about their time spent on site to a central state database.

Construction companies fear, however, that the registration of all employees at a construction site isn't proportional or reasonable, as construction sites are large and don't always include gates.

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