ALPHA. Demokratiskolan.se is a PROTOTYPE · Content review in progress
Demokratiskolan
The Informal economies card from MethodKit for Society and Politics
Card 37 of 128 · MethodKit for Society & Politics
  • AreaEconomy & work
  • Centre of gravityCentral government
  • Points of influence3 on the journey
  • Decisive electionThe general election
Economy & work

Informal economies

Black markets, criminal economy & illegal work

Undeclared work, unreported income and criminal schemes move money outside the common pot. The bill is paid by everyone else: lost tax, squeezed wages and honest companies that cannot compete fairly. The central government has most of the tools, but your own wallet is one of the sharpest.

Where does the power lie?1

  • Municipality · permits, oversight & procurement · approx 15 %
  • State · control, laws & collection · approx 75 %
  • EU · rules for mobile labour · approx 10 %

The power lies almost entirely with the central government and its supervisory agencies. The general election decides both the laws and how much the control work may cost.

How it works: the breakdown

The municipalityThe permits & the demands
The regionOn the sidelines
Central governmentThe control & the law · centre of gravity
Who decides?
The municipal council (kommunfullmäktige), the permits unit and the administrations that procure.
No formal role in the control work.
The Riksdag, the Swedish Tax Agency (Skatteverket), Arbetsmiljöverket (the Swedish Work Environment Authority), the Police (Polismyndigheten) and the Enforcement Authority (Kronofogden).
What do they decide?
Can withdraw alcohol serving permits in cases of fraud, set requirements in procurements and detect welfare crime in its own systems.
No formal role, but the region is a large buyer and can set requirements on its suppliers.
Tax control, staff registers, joint workplace inspections and the collection of unpaid debts.
Where are decisions made?
In committee meetings and in the municipality's procurements. The decisions are public.
Not applicable. The control work is national and partly municipal.
At the agencies, often in joint operations against crime in working life.
Who pays?
The municipal tax, which undeclared work erodes.
No part of the bill, but the region loses tax revenue to the fraud.
The central government budget. Every krona of undeclared work is at the same time a krona of tax that never came in.
Fastest way in?
Municipal election Propose that the municipality set fair terms in its procurements.
Regional election The regional election has its effect mostly through the region's own procurement requirements.
General election Tip off the Swedish Tax Agency or the Police, anonymously if you wish.
EUFree movement of labour creates jobs but also opens the door to exploitation, and EU rules govern the control of labour across borders. Influence it in the European Parliament election.

Read the table by column to understand one level, or by row to compare the levels. The green level is the area's centre of gravity.

How it works: follow the decision

The case An undeclared construction firm is examined
  1. State

    The Riksdag builds the control tools

    Requirements for staff registers in construction and restaurants among others, the option of unannounced inspection visits, and coordinated agency operations against crime in working life are decided by the Riksdag (Sweden's parliament).

    Point of influence

    The general election decides how strict the rules are and how many resources the control work gets.

  2. Your everyday life

    A suspiciously low bid

    A homeowner gets a quote far below all the others. No receipt, payment in cash. Someone in the neighbourhood tips off the Swedish Tax Agency (Skatteverket).

    Point of influence

    Anyone can tip off the Swedish Tax Agency and the Police about undeclared work, even anonymously. And whoever buys declared work with the RUT and ROT deductions shuts the market for undeclared work.

  3. State

    The agencies strike together

    The Swedish Tax Agency, Arbetsmiljöverket (the Swedish Work Environment Authority) and the Police carry out a joint unannounced inspection at the site. The staff register does not match who is actually working there, and the work environment turns out to be dangerous.

  4. State

    The tax is calculated after the fact

    The Swedish Tax Agency decides on reassessed tax and a tax surcharge for the unreported income. Debts that are not paid go on to the Enforcement Authority (Kronofogden) for collection. The taxpayer can appeal the decision to the administrative court (förvaltningsrätt), and further to the administrative court of appeal and the Supreme Administrative Court.

  5. Municipality

    The municipality draws its conclusions

    The firm turns out to have worked for the municipality too. The procurement requirements are tightened and the invoices are examined more closely, because a company with tax debts can be excluded from procurements.

    Point of influence

    The municipal election decides how strict the requirements the municipality sets on its suppliers are.

  6. Your everyday life

    The work is done above board next time

    The tradespeople on the next site have terms in line with the collective agreement and have insurance, and the tax on the invoice funds the school around the corner. The control chain started with a single tip.

The journey looks the same in reverse: what has been built came the same way, through the same decisions. Whoever knows where the decisions are made also knows where they can be changed.

Questions to discuss

  1. Where is the line between a favour to a friend and undeclared work, and how do you think about it yourself?

  2. Who bears the greatest responsibility for undeclared work: the one who sells, the one who buys or the one who looks the other way?

  3. RUT and ROT turned many undeclared services into declared ones, at the cost of tax money. How do you value that trade?

  4. How is an honest business owner in your town affected by others cheating?

  5. Which controls are reasonable in the fight against fraud, and where do they start to violate privacy?

Glossary

Svartarbete
Work carried out for payment without tax and contributions being reported.
Personalliggare
A list of who is working at a workplace, required in sectors with a high risk of undeclared work.
Arbetslivskriminalitet
Crime in working life where fraud with taxes, benefits and working conditions is often combined.
Efterbeskattning
The Swedish Tax Agency's decision to charge, after the fact, tax that was never reported.
RUT och ROT
Tax reductions for household services and renovation work that make it cheaper to buy declared work.

Go further

Footnotes

1) This is an estimate of how decision-making power over the issue is split between the municipality, the region, central government and the EU, based on how responsibility is divided in legislation. A teaching guide, not an exact measurement.