Germany to tighten rules against illegal labour

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BERLIN (Reuters) - Germany's cabinet will approve plans this week to clamp down on illegal labour in Europe's biggest economy and save billions of euros in lost taxes, government sources told Reuters on Tuesday.

Employees in sectors especially vulnerable to illegalworkers will be forced to carry official registration andidentity papers with them at all times from January 1, 2009,according to a draft of the new law seen by Reuters.

The construction, hospitality and cleaning industries aremost affected and under the new rules, employees will also beforced to register with a pension scheme as soon as they arehired rather than after their first salary payment.

Some studies show the black economy equates to about 3percent of Germany's gross domestic product which means taxesand social security contributions are not being paid on about75 billion euros of economic performance every year.

The government has, however, decided against immediatelyintroducing chips to hundreds of thousands of cash registers tofight sales tax evasion.

Industry associations had opposed the plans, saying theywould cost the retail sector some 1 billion euros to introduce.

The Finance Ministry said the plans had been delayed, notdropped. "It's still in the pipeline," said a ministryspokesman.

The cabinet is due to approve the plans on Wednesday.

(Reporting by Holger Hansen; writing by Madeline Chambers;Editing by Ron Askew)

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