Klingbeil intensifies efforts to combat discriminatory employment of black workers
In an effort to bolster the fight against tax evasion and black market work, the German government has announced a comprehensive legislative reform. The reform, which targets historically vulnerable industries such as construction, cleaning services, and hospitality, aims to generate additional state revenues estimated at around €1 billion annually.
The reform focuses on improving cooperation among customs, police, and intelligence services. Digital tools will be used to share and analyze data in real time, enabling authorities to detect and prevent undeclared work more effectively. This digital networking will facilitate seamless data exchange and cross-referencing information, making it easier to identify illegal activities.
The construction industry, cleaning services, and hospitality are sectors that have historically been affected by undeclared employment and tax evasion. By strengthening enforcement in these areas, the government hopes to reduce the prevalence of these practices and increase revenues for the state, states, and social security institutions.
Employers in the hairdressing and cosmetics industry will also be affected by the reform. They must immediately report new employees to the pension insurance and ensure that employees have their ID card with them and present it upon request during customs controls.
The reform package is part of a broader government push validated in the 2026 federal budget, focusing on growth, fairness, and combating financial crime and tax fraud. Other measures, such as the abolition and replacement of supply chain due diligence laws, aim to streamline enforcement against white-collar crimes and corporate misconduct.
Despite the €46 billion tax reform passed by the Bundestag on June 26, 2025, which focuses on business investment and economic growth via tax relief and corporate tax cuts, the efforts to combat tax evasion and illicit work specifically address black market sectors and involve digital coordination and stricter enforcement rather than generalized tax cuts.
The legislative reform does not have a specific title, but it forms part of the government's broader economic and fiscal strategy to improve the investment climate, fairness, and compliance. The federal budget for 2027 to 2029 currently has significant gaps, and this reform is expected to contribute positively to the consolidation of public finances.
The reform also aims to more effectively combat serious economic crime and organized crime by specifically targeting "black sheep" among subcontractors, particularly on large construction sites, and employers who enrich themselves at the expense of honest competitors, exploit workers, and harm the social system.
In addition, the Financial Control of Black Market Work will be integrated into the police information network, allowing it to independently identify illegal workers and criminals in the future. This integration should potentially relieve the judiciary by allowing the Financial Control to independently detect fraud cases.
The reform is expected to reduce the number of inspections for law-abiding companies, as improved digital networking and data exchange between authorities will strengthen the Financial Control, making it more efficient and effective in its operations. The reform aims to be a significant step towards creating a fairer and more transparent economic environment in Germany.
- The German government's legislative reform, aimed at combating tax evasion and black market work, will focus on digital tools to facilitate real-time data sharing among customs, police, and intelligence services in historically vulnerable industries like construction, cleaning services, hospitality, and now, the hairdressing and cosmetics industry.
- In the broader context, the reform is part of the German government's push in the 2026 federal budget, focusing on growth, fairness, and combating financial crime and tax fraud, alongside measures such as the abolition and replacement of supply chain due diligence laws against white-collar crimes and corporate misconduct.
