Owners of a number of small businesses have been making bogus hirings and reporting new employees do not work or receive a salary, in order to receive a reduction in income tax and in their own social security contributions by paying insurance for the non-existent staff.
The “hirings” usually concern unemployed friends or relatives, who also benefit from the scheme as it allows them to receive full healthcare coverage as well as working time toward their pensions.
For instance, an employer reports a bogus hiring on the minimum salary of 586 euros per month gross. The monthly cost in the enterprise’s books is 732.50 euros, including the employer’s social security contribution. From that amount the actual spending by the owner comes to just 94 euros for the “employee’s” contributions plus 146 euros for his own insurance, for a total of 240 euros per month.
Therefore, by paying 3,360 euros per year the entrepreneur records spending of 10,255 euros on the books, which reduces his or her own income tax and contributions by 5,311 euros, for a “profit” of 1,951 euros per year, which should have ended up in state coffers.
The problem is that such practices are extremely hard for authorities to trace unless they are reported.