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At one point in I, Milena, Milena's husband (who is a photographer) complained that someone had swindled him. When Milena suggested taking them to court, he said

What court, are you kidding? On what grounds? They paid me a bonus on top of the contract - threw me a bone, and now are free to rake in as much as they want... With the taxes we pay, if I were paid by contract alone, we'd have been looking in the trash for cans to recycle long ago!

What did he mean by this? What were the usual payment arrangements for contracts? Was it normal to expect people to pay more than the stated contract? Is this some form of tax evasion scheme? If so, how common is this type of scheme?

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  • This seems to be set in the real world. Could you give a bit more context: location, year? Generally, it has all the typical traits of the 'grey' economy: much lower figures in (any) official paperwork, hard cash for the rest.
    – Zeus
    Jul 26 at 6:09
  • @Zeus Set in Ukraine, definitely post-Soviet era but I'm not 100% sure of the exact year beyond that. Jul 26 at 12:15
  • Well, then yes. OK, I'll add it as an answer, even though I don't have hard references other than personal experience.
    – Zeus
    Jul 27 at 1:25

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Yes. Such arrangement was very common even in ordinary employment: get only the minimum wage officially, and the rest as cash in an envelope. Yes, a form of tax evasion. But the downside is reduced protection in case of a conflict.

For quite some time after 1991 this was the expected norm rather than an exception, even in ostensibly government settings (at least for overtime/bonuses etc.) I would say, this was not even so much because the taxes were particularly high, but rather because paying taxes as such was an alien concept in the ex-USSR realm, and because taking away anything from an already low pay was considered unfair. To this day, tax avoidance (by individuals or small companies) carries no social stigma.

(By the way, in case of employment, most taxes were (and still are) on the employer's side, so more often than not this was the employer's initiative/requirement).

For now, I can only back it up from personal experience.

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