article by Sergiy Taran

The wide introduction of mandatory cash registers for street and market vendors must take into account the workers’ interests. Such policies should include simplification of administrative procedures, favorable tax system and financial support with purchase and administration of cash registers.

These and other initiatives were discussed at the StreetNet International (SNI) virtual regional event on cash register machines. SNI organized an online conference for its affiliate organizations from the Eastern Europe and Central Asia region on the 7^th of November, 2024.

The problems related to the introduction of cash register machines are acute for many countries from the region. However, the approaches of state authorities on implementation of cash register machines and how street and market vendors deal with the implementation varies significantly from country to country. Since it was one of the first international events devoted to the introduction of cash register machines, the experience discussed there can be very valuable for everyone who defends the rights of workers of the informal economy and promotes a workers’ rights-based formalization process from the informal to the formal economy.

Ukraine: the struggle for the modular monotax

In 2021, cash registers have been made mandatory for most categories of street vendors. However, as a result of protests, a large proportion of entrepreneurs still do not use this technology, says Leonid Tonkovyd, a representative of the Free Trade Union of Entrepreneurs of Ukraine (VPPU). In order to reduce social tensions and due to fear of losing support among small entrepreneurs, the government introduced a moratorium on inspections, which was extended several times over several years, but now has been suspended.

A group of activists and experts in Ukraine has developed proposals to introduce taxation of small and micro-entrepreneurs based on a completely different principle, inspired by activists from Spain: a modular monotax system. This approach abandons the total tracking of cash transactions as impractical, too costly and an unnecessary burden on vendors. Instead, it proposes to set a fixed tax according to the parameters of the business. The activists hope to resume a public campaign to introduce a modular monotax system in the country when the Russian-Ukrainian war ends.

Responding to comments during the conference Leonid Tonkovyd urged that an important criteria for effectiveness of cash register machines for informal trade can be a proportion of street vendors who actually moved into the formal sector of economy as a result of the introduction of mandatory cash registers. As for Ukraine, the outcome is rather opposite: many street and market vendors are forced intoinformality exactly because of unthoughtful introduction of cash registers.

Moreover, even in terms of economic efficiency for the entire society, the cash register does not seem to have had a desired fiscal effect. Volodymyr Dubrovsky, an expert who participated in the conference noted that increased financial control does not increase people’s wealth. Therefore, facing additional complications at work and the threat of punishment for errors, many small street and market vendors are moving into the informal economy, not towards formalization

Kyrgyzstan: the mass protest of vendors and the role of the unions

In recent years, Kyrgyzstan has introduced regulations mandating street vendors to use cash register machines. These measures have sparked widespread resistance from vendors in the past, as Damira Dolotalieva, leader of the Kyrgyzstan Dordoi Market Union, explained.

There have been mass strikes which paralyzed some markets for a while, but without any effect on the policy. From 2020, the registers became mandatory. One problem is posed by the cost of the machines: the government distributed some for free in the beginning, but the majority of the vendors had to buy them for around a thousand US dollars. The fines for noncompliance were also very high.

The Market Union had to fight back. After the strikes, market activists have asked for a special status for the Dordoi Market, which is one of the most important international hubs of Central Asia. They have obtained a special economic regime: the vendors who trade internationally are not obliged to maintain an electronic cash register. However, if they sell goods in the country, they have to issue an electronic invoice. Damira herself was involved in the negotiations with the government on a special status of the Dordoi Market.

To achieve success in negotiations with the government the Market Union also introduced a program of education for workers. The program aimed to increase knowledge of workers about the taxation system and, thus, improved capabilities of market vendors to negotiate with the government on the new tax regimes and requirements on the cash register usage.

EU countries have alternative approaches on the usage of cash register machines

Cesar Carcia Arnal, General Secretary of Professionals and Autonomous Workers’ Union of Spain (UPTA), presented approaches towards cash register machines in Spain and other EU countries. The basic idea of most of these approaches is not simply to impose cash register machines on street vendors’ practice, but rather to adjust cash register machines to the needs of informal economy workers.

Spanish taxation for street and market vendors is centered around the modular system, where income levels are based on estimations rather than actual income. In other words, the government introduce certain objective scales (like area and rent of the premises, electricity consumption, the number of workers) that are taken into account in order to determine an amount of tax payments. The advantage of this system is that the taxes are transparent and fixed regardless of what is invoiced.

Therefore, the cash register machines are not necessarily required in Spain. Likewise, tickets are also not mandatory. The only case when tickets are mandatory is when a customer requests it.

Similarly, in other EU countries, approaches towards cash register machines are depended mostly on needs and decisions of street and market vendors. For example, in Germany, the receipts are mandatory, but only in case of the usage of cash registers. However, the introduction of cash registers is voluntary itself, and it is up to a street vendor to decide whether he or she wants to use it.

In France, the cash register machines are not mandatory as well since most of the fiscal transactions, including tax-related payments are linked to a bank account. Belgium is also a country where cash register machines are not mandatory, with only one exceptions – they have to be used in restaurants and cafeteria. However, Belgian traders get tax reduction if they use cash register machines in their work.

Key takeaways

• The introduction of cash registers had profound implications for street and market vendors and thus requires thoughtful consideration from all sides. The most important criteria for any decision should be the improvement of work conditions for street and market vendors.

• SNI endorses national governments and affiliate organizations to negotiate conditions for introduction of cash registers as well as financial and technical support that the street and market vendors will receive in the course of the introduction.

• The effectiveness of the introduction of cash register machines for street and market vendors should be measured by the proportion of street and market vendors who are ready to proceed with a just formalization process and to move gradually from the informal to the formal economy. SNI will support efforts of trade unions and expert organizations to develop proposals aiming to manage the introduction of cash register machines bearing in mind the interests of workers of the informal economy and benefits of the entire society.

• Best practices of EU countries must be researched and adapted to specific conditions of every country at Eastern Europe and Central Asia region where cash register machines can be introduced for street and market vendors. The goal of this adaptation is to insure labor rights of street and market vendors and small – scale entrepreneurs who substantially contribute to economic growth of their countries.

Cash register machines have a potential to improve the quality of work and to simplify the taxation systems in many countries: their introduction, however, should be planned with the consultation and input of the representatives’ organizations of street and market vendors, trade unions and other related organizations and institutions.