Medvedev takes action to limit growth of Russia’s gray economy

According to Rosstat, the number of those employed in the “gray” sector in September 2015 it had reached almost 15 million.

According to Rosstat, the number of those employed in the “gray” sector in September 2015 it had reached almost 15 million.

Igor Zarembo/RIA Novosti
Informal employment has reached almost 15 million, or 21.2 percent of the workforce, and continues to rise unchecked. The Russian government has proposed a solution to the problem: exemption from registration and taxes.

Russian Prime Minister Dmitry Medvedev has proposed an ultraliberal solution to the problem of informal employment, which has seen steady growth in recent years and continues to rise.

The new initiative would see the introduction of a notification procedure for registration of self-employment with a two-year tax holiday. The relevant resolution has already been worked out.

According to Rosstat, the number of those employed in the “gray” sector in September 2013 was a little more than 14 million people, while by September 2015 it had reached almost 15 million, i.e. the share of the unformal employment increased from 20.8 to 21.2 percent.

Medvedev said he has often heard proposals to register informal employees as self-employed individual entrepreneurs, but he chose a different solution.

"Let self-employed individuals notify the tax office about their employment and with the filing of this notice will be exempt from taxes for two or three years,” he said.

The adoption of such a law would greatly improve the situation with "gray" employment, said Ivan Yefremenkov, the head of the Support of Russia center for examination and analysis of business problems.

However, Vladimir Gimpelson of the Higher School of Economics in Moscow said that in order to solve the problem “there’s a need for [well-functioning – RBTH] institutions, regulations, courts.”

For now, according to Maria Ignatova, head of HeadHunter Research, there is no "serious exodus into the informal sector,” though if the difficult economic situation continue this year and next year, "some sectors of the economy may again begin to return to paying salaries in envelopes," she said.

 "The shadow labor market is estimated at about 23 percent of the workforce of the legal market,” reported the press service of the Ministry of Labor.

Illegal labor relations, according to the Ministry of Labor, are can be seen in the construction, agriculture, trade and service sectors, where goods and services are paid for in cash.

First published in Russian in Gazeta.ru

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