Getting People in from the Shadow in Eastern Europe

STORY HIGHLIGHTS

• Shadow economy: sum of people & firms doing business in a country's untaxed and unregulated markets for goods, labor and services; more likely to be men, less educated and working more low-skill jobs
• Convincing people of the benefits of paying taxes and building trust in their governments are fundamental to get informal workers and business owners to turn to formal economy
• Making formal work and business viable through tax incentives, smarter social safety benefits and better regulation is also critical

Even as countries in Eastern Europe battle the effects of the global financial crisis, one aspect of their local economies has come under particular scrutiny – the extent of work and business in the "shadow economy".

What is a "shadow economy" and who is part of it?
Magda makes a good example. She is a hairdresser who works at home, has a select and loyal clientele, and steady income. Magda also does not pay income taxes, and her business is unregistered.
Jacek, Magda’s neighbor, is another example. He owns a small construction business and employs men by the day. He is paid in cash, pays his men in cash and reports only part of what he makes as income to the authorities.
Magda and Jacek are among millions of workers in a similar position who work or run a business by avoiding taxation, and outside the boundaries of social, labor and business regulations.  They make up the shadow economy.
Studies show that people working informally in the shadow economies of the newest European Union members are most likely to be men working manual, casual and low-skill jobs such as construction, transport, agriculture, and light manufacturing.  Most have completed secondary education, and a substantial minority even has some university education.  They are also more likely to be native born.
Measuring the exact size of a country’s shadow economy, however, is challenging.

WHY NOW?
One way to measure it is to look at how many workers and business owners are likely to be informal. Taking those workers who do not have a written work contract and certain types of self-employment as informal allows us to measure informal employment as a share of total employment in a country.
Gauging the shadow economy as a percentage of a country’s gross domestic product (GDP), is one indicator of its size. At its highest, the shadow economy made up 33 percent of Bulgaria’s GDP in 2007, while it was 17 percent at its lowest in Slovakia. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovenia fell somewhere in between.
Those numbers have improved slowly since then, but amid the ongoing financial crisis, tackling the issue has taken on a renewed sense of urgency.
With many Eastern European countries struggling to consolidate their fiscal positions, convincing citizens that they can benefit from contributing their fair share of taxes and social security contributions is critical. While this helps shore up countries’ finances, citizens also reap the benefits of participating in the formal sector in the long run through better protection for them, their families, and their businesses.
Not participating in the formal economy brings its fair share of trouble.
For individuals and their families, this could mean less protection, less income security, a lack of legal rights if the need arises, inability to plan for their future, lack of access to health care, and inadequate income in old age.
Businesses would not be able to grow meaningfully or avail of credit or legal protection when they need it. This also takes a toll on society, where there is a substantial lack of financing for public services and goods, making the system underfunded and inefficient in several instances.

EARNING CITIZEN TRUST
“In From the Shadow – Integrating Europe’s Informal Labor” is a report that addresses these issues by providing policy guidance for the European Union’s new member countries.
Governments have to make it viable for people to work or run their business in regulated and taxed markets. This means a friendlier tax system and making it useful to people to accurately report income by making the resulting social and employment protection viable. Low-paying, casual part-time jobs, mostly done in the informal sector, need to become more attractive when done formally. This means granting tax incentives for low-wage earners and designing smarter social benefits that reward formal work.
It is also critical to tweak labor market regulations to encourage companies to employ workers through official channels, by working on minimum wage requirements and the process of hiring workers or letting them go.
But improving structural incentives is not enough.
Changing social norms about paying taxes is most important. Building trust in government is a key factor in convincing citizens paying taxes is useful. Good governance, treating taxpayers respectfully and delivering high quality of public services is essential.
Structural reforms and improvements in institutional credibility may be a long drawn and tough process, but is critical to drawing people in from the shadows.

Source: www.worldbank.org
See also:  Report: Bulgaria Relies Heavily on Shadow Economy

NATO’s partners in the South Caucasus

On 6 and 7 September NATO’s Secretary General visited the South Caucasus – a region that is strategically important to the Alliance. NATO has been progressively deepening dialogue and cooperation with Armenia, Azerbaijan and Georgia since the early 1990s. All three partners provide valuable support to NATO-led operations, while benefiting from NATO support for security and defence-related capacity building and reform.

The South Caucasus is a crossroads of civilizations, situated between the Black Sea to the west, the Caspian Sea to the east and bordering Turkey, Russia and Iran. The region has been of considerable geostrategic importance through the ages – and continues to be so today.
The region borders the territory of a NATO member state and includes Georgia, a country aspiring to join the Alliance. It also offers useful alternative transit options for the transport of supplies to and from the NATO-led force in Afghanistan.

Shared security concerns

The Allies and their partners in the South Caucasus face the same security challenges, such as terrorism and the proliferation of weapons of mass destruction. Such threats defy borders and can only be addressed effectively through international cooperation.
Energy security is an important security issue of shared concern. The South Caucasus sits on key oil and gas transit routes, and has significant oil and gas reserves. Energy-importing countries are looking to diversify their energy sources and supply routes, while energy-exporting and transit countries need to ensure the security of their industry and pipeline infrastructure.
One serious concern are the protracted conflicts in the region. Following a conflict between ethnic Armenians and Azerbaijanis from 1988 to 1994, the sides agreed a cease fire in May 1994. However, a political settlement still needs to be found. The Abkhazia and South Ossetia regions of Georgia continue to be sources of tension, in particular following the conflict with Russia in August 2008.
NATO does not seek a direct role in the resolution of these conflicts, but supports the efforts of other international organizations, which have specific mandates for their mediation roles.The peaceful resolution of conflict is a core value of NATO and is at the heart of the commitments that NATO’s partners in the South Caucasus undertook when they joined the Partnership for Peace.

Valued support for operations

All three Caucasus partners have provided valuable support for NATO-led operations. Armenia has been contributing troops to the Kosovo Force (KFOR) since 2004. It first deployed personnel in support of the International Security Assistance Force (ISAF) in Afghanistan in 2010 and increased its deployment from 40 to 126 in 2011.
Having actively supported KFOR in the past, Azerbaijan currently has 94 personnel deployed in support of ISAF. The country also supports ISAF’s mission with over-flight rights and has contributed to the development of Afghan national security forces through financial support and training in de-mining.
Today, with around 800 military personnel deployed in Afghanistan, Georgia is the second largest non-NATO ISAF troop contributing nation and planned deployments this autumn will make it the largest. The country also supports Operation Active Endeavour, NATO’s counter-terrorist maritime surveillance operation in the Mediterranean. Georgia also contributed to KFOR in the past.
All three countries are actively working towards the development of units that meet NATO standards and that can in future participate in international peacekeeping operations.

Deepening partnership

Bilateral partnership programmes with NATO allow each of the Caucasus partners to draw on Allied expertise in adapting their defence institutions and capabilities to deal with security challenges. In the past decade, all three countries have chosen to deepen the level of cooperation and tighten the focus on their respective reform priorities.
Armenia and Azerbaijan have both developed Individual Partnership Action Plans with NATO. In the case of Georgia – following a dialogue with the Alliance about its membership aspirations and the declaration by Allies at the 2008 Bucharest Summit that the country will become a member – intensified cooperation is now being taken forward through the unique framework of the NATO-Georgia Commission that was established in September 2008.
Beyond cooperating on security and defence-related capacity building and reform, NATO and its partners in the South Caucasus work together in other areas such as border security, cyber security, and disaster preparedness and response.
Partnership has also brought some tangible benefits for citizens in the Caucasus countries. For example, in Armenia – a country prone to earthquakes – NATO provides training to improve the search-and-rescue capabilities. In Azerbaijan and Georgia, NATO has supported projects to clear and safely dispose of large numbers of dangerous, unexploded and obsolete landmines and munitions.

Source: Nato.int

Rusia-UE: hacia un régimen sin visados

Original text: Служебные паспорта поданы на отмену виз

Moscú y Bruselas están cerca de un gran adelanto en cuanto a la supresión de visados para los titulares de pasaportes de servicio, el último obstáculo para la firma de un acuerdo para la reducción significativa del régimen de visados entre Rusia y la UE. Es sabido que este será un tema clave en la reunión que se celebrará en Chipre en octubre.

El próximo 3 de octubre 2012 se celebrará en Nicosia (Chipre) una reunión del Consejo Permanente de la Asociación Rusia-UE sobre cuestiones de  libertad, seguridad y justicia entre  representantes del Ministerio de Justicia y el Ministerio del Interior. La delegación rusa estará encabezada por el ministro de Justicia, Alexánder Konovalov. Uno de los temas principales de la reunión será la liberalización del régimen de visados.

El diálogo sobre el régimen de visados entre Rusia y la UE sigue dos direcciones. Por un lado se trabaja la aplicación de una lista de 'medidas comunes' aprobada a finales del año pasado, y por otro, en la posible abolición del régimen de visados ​​existente. En cuanto a la primera dirección no se esperan sorpresas. Los negociadores en Chipre solo llevarán a cabo resultados intermedios de las 'medidas conjuntas'. Las partes tuvieron tiempo al menos de intercambiarse los informes de progreso en cuatro áreas clave, y ahora se están preparando para enviarse unos a otros inspecciones para verificar el trabajo en los puestos fronterizos de control.

El avance podría ocurrir en el segundo ámbito. Las partes esperan en Chipre eliminar la última cuestión controvertida y dar pasos favorables hacia la firma de un acuerdo que modifique el firmado en 2006 sobre la facilitación de la expedición de visados ​​a los ciudadanos de la Federación de Rusia y la UE.

En la nueva edición se incluye la completa abolición de visados ​​para determinados ciudadanos:  miembros de las tripulaciones de líneas aéreas civiles y de la Marina civil. Además hay una ampliación de la lista de titulares de visados ​​de múltiples entradas válidos por cinco años, y la simplificación de los procedimientos de visado para todos los ciudadanos que ya hayan recibido un visado anteriormente. El único obstáculo para la firma de este acuerdo es la cuestión de los pasaportes de servicio: Moscú insiste en la supresión de los visados ​​para los titulares de los mismos, Bruselas se opone.

Los pasaportes de servicio los emite el Ministerio del Exterior de Rusia a empleados ordinarios de misiones diplomáticas y consulares, a las organizaciones internacionales, a militares que viajan al extranjero, a empleados de las empresas estatales y del Banco Central, a los miembros de los servicios administrativos y técnicos de la Oficina de la Presidencia del Gobierno, de la Duma del Estado, y otros empleados de agencias gubernamentales y miembros de sus familias. El número de titulares con estos pasaportes oficiales en Rusia es de unos 15.000, y en la Unión Europea cerca de 20.000.

Según una fuente de la delegación de la UE, Bruselas dejaría la cuestión de la abolición de visados ​​para pasaportes de servicio fuera de los marcos del acuerdo "debido a las dudas sobre si los pasaportes oficiales rusos se emiten solo a aquellos a quienes son merecedores de ellos".

Aunque la parte rusa está en total desacuerdo: "¿Cómo se puede decir que se expiden pasaportes sin control, si son concedidos por la una sección de un departamento de un ministerio?”

Según palabras del funcionario ruso, Moscú ha enviado a Bruselas en repetidas ocasiones explicaciones sobre el procedimiento para la emisión de pasaportes de servicio a los ciudadanos de Rusia. Sin embrago el negociador europeo insistió: "Hay dudas de que este orden se observe". 

A las conversaciones técnicas se superpusieron contradicciones más profundas. Según una fuente de la delegación de la UE, Bruselas daría mayor libertad de movimiento a aquellos grupos de ciudadanos que "favorezcan más activamente el acercamiento de los pueblos y la ruptura con los estereotipos existentes: estudiantes, académicos, representantes de organizaciones no gubernamentales, periodistas y empresarios. Los funcionarios no son nuestra prioridad", declaró.

En Moscú, se hace hincapié en otras cuestiones. "Este no es un acuerdo de intercambio de jóvenes y se aplica a todas las categorías de ciudadanos", replica el negociador ruso. Según él, Rusia da pasos "en un camino que aboca hacia la abolición total de visas".

"En 2006, se cancelaron visas para titulares de pasaportes diplomáticos, 'el más seguro' para la UE desde el punto de vista de la inmigración de ciudadanos. El siguiente paso sería la eliminación de visados ​​para pasaportes de servicio. Luego a estos pueden seguirles los estudiantes o la tercera edad, etc. Pero si ni siquiera quieren hablar de pasaportes oficiales, ¿cómo entonces creer sus palabras sobre la disposición para cancelar por completo los visados?"

Hasta el momento, la cuestión de los pasaportes oficiales parecía un callejón sin salida. Sin embargo, en el curso de la preparación para la reunión en Chipre, comenzaron a discutirse las condiciones del acuerdo que pueden desbloquear la situación. Una posibilidad podría ser la supresión de visados ​​para los titulares de pasaportes de servicio electrónicos (propuesta de Rusia) o la exención de determinadas categorías de visados para titulares de pasaportes oficiales (idea de la UE).

Rusia cuenta con el apoyo de Chipre, que actualmente ostenta la presidencia de la UE. Nicosia tiene una razón para ocuparse de los funcionarios rusos: esta semana medios de comunicación chipriotas informaron que Moscú dará un crédito a Chipre de 5.000 millones de euros. Si las negociaciones en octubre tienen éxito, el acuerdo sobre la liberalización del régimen de visados ​​podría ser firmado en diciembre, durante la cumbre UE-Rusia que se celebrará en Bruselas.

Source: Rusiahoy.com