85. In the _Czech Republic_ , self-employed also benefit from a lower labor tax wedge due to a lower tax base for social insurance contributions, which is only half that of employees. According to a survey by the Research Institute for Labor and Social Affairs (Výzkumný Ústav Práce a Sociálních Vĕcí, RILSA), the number of ―false‖ self-employment (in Czech labelled as ̳švarcsystém‘) amounted to 100,000 in 2006-2007. Experts from the Czech Chamber of Commerce (Hospodářská komora ČR, HK ČR) estimate that this figure could be significantly higher at 200,000 workers. These figures represented between 13 and 26 percent of the 750,000 self-employed individuals in the Czech Republic in 2007. This type of work contract is not common among large firms but more among medium-sized and smaller companies. According to the survey by RILSA, despite short-term benefits for the firms, over the longer-term this type of labor contract also carries risks as competitiveness could decline due to insufficient training and lack of loyalty. Furthermore, due to lower social insurance benefits, the self-employed face a higher poverty risk over the longer-term.

86. In the _Slovak Republic_ , self-employed workers also benefit from a lower labor tax wedge, as their tax base for social security contributions is only half of the average monthly taxable income of the previous year. This encourages bogus self-employment and has led to a nationwide discussion on false self-employment during the preparation of the amendments to the Labor Code in 2006/2007. The main critique was the insufficient social protection of involuntary self-employed workers. The policy objective is to eliminate involuntary selfemployment.

87. In _Latvia_ , there is an ongoing debate about the need to simplify the tax regime for SMEs and thereby remove incentives for undeclared work. Self-employed workers have to register with the State Revenue Service (Valsts Ieņēmumu Dienests, VID) and to record all economic activities (income, costs) in a special record book. Self-employed persons, who work as individual businesspersons, are required to register themselves with the local government. They are personally responsible for paying personal income tax and social contributions. The record book helps the VID to control tax payments. However, the contracting company can also directly pay taxes for the self-employed, although this is not obligatory. The personal income tax is 15 percent of business income of self-employed people, which is lower than the tax rate on wage income (25 percent). The self-employed benefit from the fact that they can optimize personal tax payments more effectively than employed persons because they have less restrictive rules for reporting individual costs. For example, they may reduce their taxable income by including in their deductible expenses transportation costs from and to the workplace, part of living space rent, communication costs (telephone, internet), etc. The social contribution rate is 29.95 percent of the payroll for selfemployed people, compared with 33.09 percent of the payroll for employees. In general, the majority of social contributions (25 percentage points) is paid by the employer and only 9 percentage points is paid by the employee, while self-employed persons pay the whole contribution. Self-employed people do not need to pay social contributions if their monthly income is below a threshold (in 2009 EUR 213). If it exceeds this threshold, social contributions must be paid at least from this amount, and it is up to self-employed person to decide how much to pay for social contributions from the exceeding amount. The amount of payment is strongly correlated to the level of social benefits (including old age pension), payable to self-employed workers. **There is anecdotal evidence that some employers force workers to accept the status of self-employed in order to reduce labor costs and sometimes these people work without a contract, and without any social security coverage.** 36