It is no secret that the construction companies in their activities rely mainly on cash transactions and cash flows with the official purpose of the payment is often sent for cashing.
In principle I understand why the shadow economy is booming in the service sector. In fact we are talking about simple cash in cash order to evade taxes. The choice of this sector is not accidental: unlike goods, service is not material, and establish the fact of its rendering at a certain cost in the past is almost impossible. Those with cash in the services sector, the tax authorities are quite successful fighting.
But the construction with materials and equipment occupying a total share of 50% of the shadow economy, raises serious concerns. Such a huge shadow turnover of cash means that there is significant demand and a lot of people take pleasure in their work cash. In practice, this indicates not only the tax evasion but also about the complete lack of control of the entire construction sector.
What is the danger
As you know, construction in a large volume requires low-skilled labor. If the employee receives wages in cash, it is impossible to verify, it is actually employed or not, and how to observe the working conditions and safety.
The ability to pay cash enables you to hire illegal immigrants, such jobs attract. And the availability of cheap illegal labor, in turn, creates difficulties in finding employment for law-abiding citizens.
In addition, a large number of low-skilled workers, who usually live in crowded conditions, have no legal status, very poor and, indeed, powerless is a significant criminogenic factor. These people have nothing to lose in life, the penalty of imprisonment does not frighten them (in prison at least provided with regular meals), and around plenty of temptations. Because of this situation, a growing number of violent crimes both against property and against persons.
Another negative aspect of the shadow economy is the lack of control of construction quality. If the Builder buys stuff for cash, it arises a great temptation to save on materials. The presence of illegal operations during construction encourages construction holdings as quickly as possible to eliminate the direct developers. After the liquidation of the construction company to answer in the future for the quality of the object, of course, no one. Errors in construction, often manifest only after several years.
Also at risk are investments in construction. In joint construction, a situation when a regular basis, every two to three months, bankrupt a developer and real estate investors arrange meetings and overlappings of highways. This is because after the funds are received the construction company operations with money shareholders have no relationship to real life. In the end, to check and see where the money has gone, is almost impossible. Law enforcement agencies only state the fact of theft.
The availability and circulation of cash money, provoked civil servants to demand bribes. In a situation when there are illegal operations and the cash verifiers difficult to resist corruption, and bribes required cash, which again creates the same vicious circle.
Dividends in envelopes
The government has already committed itself to the fight against shadow turnover of funds, but to determine the right tactics, they have failed quite a long time. Only recently, after the introduction of careful monitoring of cash flows, cash began to wane, due to lack of cash will inevitably stagnate and cheat for cash.
For example, now, when big business need cash (perhaps not very legitimate aim), use the scheme with the withdrawal of funds via dividends to shareholders-individuals, that is, with the payment of all taxes, both corporate and personal. Five years ago, such a scheme of cash and in a bad dream could not dream anybody from the “captains” of shady business and then fight the state is successful.
However, the reverse side of this struggle becomes fully transparent. All our operations are monitored, analyzed, and stored in relevant databases, that is, the concepts of privacy and trade secrets are becoming more and more vague.