New publication: Grey Economy – Control statistics 2015

Tax Administration Bulletin, 3/30/2016

Compiled by the Grey Economy Information Unit, this publication offers an entire perspective of the 2015 statistics sourced from a number of public authorities.

Grey Economy – Control statistics 2015 presents the results of the Tax Administration's audit work, the number of financial crimes dealt with by the Police and Customs Finland as well as statistics on alcohol control.

An increase in aggravated crime  

The Tax Administration's statistics on crime reports show a 22-percent growth from 2012 to 2015 in the number of cases of aggravated debtor's dishonesty. Similar trends may be observed in aggravated tax fraud.  This felony also had a considerable proportional share.  In 2015, the Tax Administration reported 543 cases of tax fraud to the Police – over 82 percent of them were aggravated tax fraud.

The majority of the reports resulted in conviction: the courts closed 300 proceedings in 2015, and the number of convictions was 272, while charges were dismissed in only 29 of the proceedings.

In 2015, a total of 1,842 economic offences were reported to the police. This was the highest number in the past ten years.  A total of 310 cases involving aggravated dishonesty by a debtor were reported to the police in 2015, which is an increase of 52.7% three years. During the same period, the growth rate of aggravated tax fraud was 33.8%.   

In 2015, a total of 856 cases of tax fraud were uncovered by Customs Finland. The number of all types of tax fraud uncovered by Customs has increased by 61.8 percent in three years.

The Tax Administration increased the number of audits

The Tax Administration carried out more than 4,500 tax audits in 2014 and 2015. This is an increase of around 1,000 audits compared to previous years. The increased numbers are explained by an emphasis on risk-based auditing and real-time audits.

There also was a significant increase in 2015 in the number of tax audits focusing on shadow economy (1,041 audits). In addition, many more cases were observed in 2015 than in previous years of constructive dividends being distributed to shareholders.

Control measures of Finnish Customs and the increase of e-commerce

Both the total value and quantity of counterfeit products caught by Customs, as well as the number of breaches against intellectual property law have decreased. This development is a result of many factors including the growth of electronic commerce, which in turn has led to a smaller size of deliveries. Especially high-tax products are typically traded on-line.  Other EU countries are reporting similar trends.

Control measures on licensed restaurants   

Regional state administrative agencies and the National Supervisory Authority for Welfare and Health (Valvira) are responsible for supervising the serving and retail trade of alcoholic beverages.  Their control measures aim at preventing the incidence of high indebtedness and at reducing the number of financially unhealthy businesses in the sector.  Some 2 million euros of tax debts were paid up by license holders in 2015 when they had been subjected to control measures by a regional administrative agency and received an official inquiry on the nature of their debts. This was done as part of their reliability appraisal.

Improved compliance to the Act on the Contractor's Liability  

Good results were achieved from the long-term cooperation across administrative sectors, through which control measures are taken with respect to the provisions of the Act on the Contractor's Liability.  Today, there are more and more contractors who fulfil their obligations under the Act on the Contractor's Liability, which results in fewer penalty fees being imposed.   Similarly, mandatory name tags (at construction sites) are today being worn more widely than before.  

Nevertheless, there are still many occurrences of incorrect payroll accounting and incomplete recording of working hours. This and other observations highlight the importance of cooperation across administrative sectors.

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All the "Snapshot" articles describing the grey economy are here.