Following a year-long secret investigation, the social security Institution (SGK) has discovered a number of fraudulent schemes that helped 7,000 citizens receive social security services and retire through underhanded methods.
The institution found 156 shell companies helped 7,000 register as either SGK retirees or receive extra services from the SGK in return for certain amounts of money. The illegal proceedings are estimated to have caused the SGK a loss of around tl 70 million ($38.3 million). The institution says this is one of the largest investigations in terms of the size of the fraud in SGK history.
The shell firms defrauded the SGK by pretending their “customers” served the minimum number of work days required to be eligible for retirement. Under current law, one is required to have worked insured for 10 years and paid premiums for 1,800 days in order to be entitled to certain benefits, including disability and death benefits. The latest investigations reveal 7,000 members of the social security scheme resorted to illegal methods to upgrade their status to retired.
Having discovered the shell firms, the SGK cancelled the services offered to the 7,000 and levied heavy fines on both the companies and the individuals involved. The institution has warned citizens to refrain from using such methods, saying the money they pay these companies will go in vain. The SGK said those who used these methods will have to repay the amount for services they unfairly benefited from with interest.
SGK officials said the comprehensive investigation commenced last year following reports of abuse in İstanbul. SGK auditors separately contacted 1,000 SGK members in İstanbul to receive details about the alleged fraud schemes. The investigation has revealed thousands of others were involved in the scheme. The auditors reported that the schemes targeted citizens from lower income and educated classes. The schemes first established front companies and knocked on SGK members’ doors, promising them an “easy and cheap retirement.” Citizens who pay TL 200 per month to the front company are provided with documents indicating they are insured workers with the number of days added to show they are eligible to retire. They can also receive such basic services as health care from the SGK. Auditors added that participants in the scheme deceived some SGK members, introducing themselves as SGK advisors.
SGK officials said the institution has started legal proceedings against the unearthed schemes and will do the same if new schemes are found.
As part of efforts to combat unregistered employment, the SGK conducted a comprehensive investigation into separate sectors. The institution last week announced it had received TL 38 million from football clubs that had failed to pay premiums for players and managers to the state. The amount of money allocated to the SGK from state coffers increased by TL 7.4 billion in the first half of this year. The SGK cites the fact that the revenue from the restructuring of SGK premium debts declined to TL 1.6 billion in the first six months of 2012 from TL 4 billion in the same months of 2011, worsening the institution’s balances.
Questions were recently raised over the difference between how much Turkey’s rich earn and how much they pay to the state in taxes. The amount of money stored in offshore bank accounts by Turkey’s wealthiest individuals and businesses is $158 billion, a recent report shows. SGK findings show casting companies -- similar to soccer clubs -- paid relatively lower social security premiums to the state for their players and managers, pretending that they are minimum wage workers. The SGK has announced new changes to articles regulating SGK premium payments of casting firms along with actors and singers in a bid to avoid possible tax evasion. Observers have argued the SGK should put an increased emphasis on combating unregistered employment.