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Trilateral Conference on “Tax and social fraud”
Parental benefitMonika ToigerEstonian Social Insurance Board
Trilateral Conference on “Tax and social fraud”
The main task of Estonian Social Insurance Board is organization and coordination of grant and payment of the state benefits, pensions and compensations
Parental benefit Income related benefit The parental benefit is calculated on the basis of the
income, subject to social tax earned in calendar year prior to the day on which the right to the benefit arose
Income earned abroad is not subject to social tax in Estonia and is not taken into consideration
Trilateral Conference on “Tax and social fraud”
Estonian Tax and Customs Board Collecting taxes in Estonia, including social tax The benefits paid by Health Insurance Fund (sickness
benefits, maternity benefits etc), Unemployment Fund (unemployment benefits) and Social Insurance Board (parental benefit, pension) are all calculated on the basis of the income subject to social tax earned
The employers are required by the law to pay social tax for all persons employed, whereby the rate of this tax is 33% of the taxable amount, and of which 20% is allocated for pension insurance and 13% for health insurance
Trilateral Conference on “Tax and social fraud”
If the parent has no former income, then he/she has right to get benefit in minimum rate, which is 278,02 € per month in 2012
Permanent residents and aliens residing in Estonia are entitled to parental benefit
People have the right to receive parental benefit from the day following the final day of pregnancy and maternity or adoption leave. Parental benefit is paid for the period of 435 days
If a mother doesn't take pregnancy and maternity or adoption leave, she has the right to parental benefit starting from the moment her child is born
Trilateral Conference on “Tax and social fraud”
The upper limit of the amount of the parental benefit is
three times the average salary from the year before last, which in 2012 is 2143,41 € per month
Parents may work or earn income during the period in which they receive the parental benefit, but if the income earned exceeds the rate of the benefit, the amount of the benefit for the month in question is reduced
The parental benefit is not paid if the income earned is more than five times higher than the base rate of the benefit, i.e. 1390,10 € per month
Trilateral Conference on “Tax and social fraud”
People try to find different solutions to get higher parental benefit
For example Employer hired a person with contract for half time work
and another person with contract for full time work The person who got salary for full time work, was working
only with half time. Her income was declared for the calculation of parental benefit
She didn't get this income, based on which the parental benefit was calculated
In reality she paid half of her salary to another person, who was working full time with half time contract and whose legal income was arrested by bailiff
Trilateral Conference on “Tax and social fraud”
Tax and Customs Board has made a report where they took the people whose parental benefit was calculated on the basis of 2009, 2010 income (registered social tax) under observation. Their aim was to find out how many people from them had the changes in their income (higher) in 2009 and 2010
30% out of them had had a change in income 219 social tax declarations of 2009 were changed
retroactively 566 social tax declarations of 2010 were changed
retroactively
Trilateral Conference on “Tax and social fraud”
Changes, where former declaration with lower income was annulled and higher income was declared
Also declarations, where previously higher income was declared and later (after the parental benefit had already been granted) the declaration was changed and the lower income was shown
One group are the employers who declare high income and don’t pay social tax
If the social tax is paid, it seems that everything is in good order
If the company’s owner is a man whose wife is his only employee and he hired her the same time when her pregnancy started and started to pay very high salary to her, this is apparently tax and benefit fraud
Trilateral Conference on “Tax and social fraud”
It is very hard to investigate and prove the fraud The employee can say that the employer has the duty to
pay social tax, not the employee and he/she didn’t know about the fraud. The employers can say, that they didn’t get any profit from that.
A meeting was held with Tax and Customs Board and Ministry of Social Affairs to find out what are the possibilities to avoid such situations
Longer reference period: if at present the person´s benefit, who has right for parental benefit in year 2012, is calculated basis on her/his previous calendar year income, then this could be year 2010 (income of the year preceding to the previous year prior to the day on which the right to the benefit arose)
Trilateral Conference on “Tax and social fraud”
People move abroad to work, to live People have obligation to inform Social Insurance Board
and Population Register about their right address People don’t inform authorities about this If the entire family moves abroad and there is no
connection with employment in Estonia (child care leave etc), there is no right to get family benefits
Connection with employment and EU, could be right to get benefits
Primary and secondary payment
Trilateral Conference on “Tax and social fraud”
The primary competent state has obligation to pay benefits in full rate
The secondarily competent MS should provide the amount of the differential supplement whenever there remains something to be paid (if the benefit rates are higher in this state than in primary competent state)
It is not allowed to get family benefits from two countries in full rate for the same period
Regulations 883/2004, 987/2009
Trilateral Conference on “Tax and social fraud”
People move from one country, where they used to reside, to another and another and they are just claiming benefits from the first state, their aim is to get benefits, “shopping of benefits”
Family has moved to Spain and has not informed Estonian Population Register, nor Social Insurance Board about this
New baby is born in Estonia and family is claiming for parental benefit in Estonia (according to residence)
Trilateral Conference on “Tax and social fraud”
Actually they have been living in Spain already for many years
Estonia starts the payment of benefits It is a benefit fraud when people claim benefits, but they
have no right to claim them At the end of the day this is big money for the states A lot of the cases are never discovered Time limits in national legislations for recovery of unduly
paid benefits How to get to know about the cases Information from competent institutions from other MSs,
information from other competent institutions inside the state (Health Insurance Fund)
Overpaid amounts of the benefit shall be reclaimed
Trilateral Conference on “Tax and social fraud”
The information between MSs doesn´t move quickly enough
Sometimes another MS starts payment of benefits without asking information from another state (former state of residence, employment)
People don´t inform authorities about their moving, employment
The problems of determination of the legislation applicable
The basic rule: the state where the person is employed More than one state involved, then special rules apply Determination of the country of residence
Trilateral Conference on “Tax and social fraud”
How to avoid overlapping of benefits Active assistance between the institutions in different
states and inside the state Bilateral cooperation (neighbouring countries) For example data exchange between Estonian and
Finnish Population Registers, regular meetings between competent institutions
Regular meetings of experts form institutions in order to create a network between MSs at the EU level
Informing the citizens, employers about their rights and obligations
Trilateral Conference on “Tax and social fraud”
Electronic data exchange EESSI (Electronic Exchange of Social Security
Information) 1. May 2014 All data concerning social security should be possible to
exchange electronically between MSs Big challenge to put together all the business needs and
technical possibilities The possibility to control from database if the person gets
any benefits or social insurance from other MS-s Doesn´t solve all problems Human factor always remains
Trilateral Conference on “Tax and social fraud”
We must not forget that the rules for coordination of
national social security systems fall within the framework of the free movement of people and should contribute towards improving their standards of living and conditions of employment
The aim of the regulations is not to give the opportunity of “shopping the benefits”
Trilateral Conference on “Tax and social fraud”
Social Insurance Board
www.ensib.ee + 372 640 8118
Estonian Tax and Customs Board
www.emta.ee +372 676 1200
Thank you for your attention!