According to experts, the lion's share of the shadow economy in Germany is in the construction sector
Mowed your neighbor's lawn? Stopped by a friend's auto repair shop to fix their car after work? When it comes to providing services as a personal favor, helping relatives, neighbors, or acquaintances "as a friend," it's all fine. But if you did some under-the-table work (in German, this is called Schwarzarbeit, literally "black work") and earned a decent amount while hiding it from the tax authorities, then the law steps in.
As Deutsche Welle notes, about seven thousand employees of the German customs service (Zoll) fight against such violators of German law. Their primary task is to check compliance with relevant regulations. And if violations are found, customs officers take on the responsibility of prosecuting the offenders—both those who did the under-the-table work and those who paid them for it.
Illegal employment destroys legitimate jobs, leads to rising unemployment, and deprives the state of revenue from taxes and social security contributions. In 2018, the German economy lost more than 300 billion euros, according to experts from the Institute for Applied Economic Research. The lion's share of the shadow economy is in the construction sector. However, estimates vary widely: from 9 to 30 percent of the total damage.
For example, in mid-February 2019, a large-scale inspection of construction sites was carried out in four federal states with the participation of 250 customs officers, police, and other agencies to identify those working illegally. Seventeen construction sites came under the scrutiny of customs and prosecutors. The damage caused by the evasion of social security contributions in just this one specific case is estimated at one million euros. And this is just the tip of the iceberg, emphasize the headquarters of the German customs service (Generalzolldirektion).
Illegal labor hits particularly hard in sectors that employ low-skilled workers where knowledge of German is less important. These include the catering industry, construction, cleaning, and building maintenance, customs officers cite as examples.
Germans often help their neighbors or acquaintances. If an acquaintance helped trim trees and received a small monetary reward for it, that is not yet an offense. As the German customs headquarters emphasizes, "favors or services provided as part of neighborly help are not illegal, even if a small amount is paid for this service."
What amount is considered small here? There are no clear boundaries. The decisive factor, German customs officials explain, is that the provision of services is not done on a regular basis and is not a permanent source of income for either party.
"Providing work to a foreigner who does not have the appropriate residence permit for Germany can be punished with a fine of up to half a million euros. Under certain conditions, the employer may face imprisonment," explain German customs officials. Theoretically, up to ten years if the employer has used or provided illegal labor extensively, systematically, and repeatedly.
But that is the harshest punishment. Typically, it is an administrative offense, and the maximum fine here is 50,000 euros. Plus, you will have to pay social security contributions—even for a cleaning lady who came once a week and received 20-30 euros in cash. In short, that is also a lot.
Of course, it is difficult to catch an electrician who occasionally does under-the-table work after his official working day, or a cleaning lady who mops floors in someone's apartment. But if it is an organized group, a company engaged in such illegal activities, law enforcement will almost certainly track down the illegal workers. It will be enough to compare the volume of work, the number of workers, the amount of social security contributions, and so on.
And one more point that German customs emphasizes: citizens of non-EU countries, including Russians and Ukrainians, must have the appropriate residence permit that gives them the right to engage in a particular work activity. What are the consequences if caught? The offender may be deported from the country and may also be banned from entering the Schengen area for several years.
However, as Deutsche Welle was told at the German customs headquarters, "citizens of Russia and Ukraine have not been particularly noticeable among such illegal workers."