The Tax Administration keeps a close eye on the shadow economy, malpractice and fraud

The Tax Administration has sought to help companies in the coronavirus situation, for example by extending deadlines and easing the terms of payment arrangements. The exceptional circumstances also call for increased monitoring and control to ensure that these measures are not misused.

Because of the exceptional circumstances caused by the coronavirus, some exceptions have been made to the usual procedures followed in taxation. The Tax Administration has supported companies by extending deadlines, allocating more resources to the processing of VAT refunds, and easing the terms of payment arrangements. It is for the benefit of society and honest business operators to ensure that the shadow economy cannot take advantage of these measures.

Same old story: Most do the right thing, some don’t

Exceptional circumstances can create opportunities for fraudulent operators. The Tax Administration monitors the situation closely in cooperation with other Nordic tax authorities.

Examples of detected malpractice:

  • Returns and reports filed to the tax authorities may contain false information, such as too little VAT or falsified turnover or wage payment data. This false or fictitious financial information is meant to improve the company’s credit standing and take advantage of the support and services offered by the welfare state.
  • It seems that accelerated procedures may increase the threat of identity misuse and refund fraud. These are being monitored and controlled with special care.
  • Bankruptcy-related crimes may increase as the number of mergers, acquisitions and changes in ownership rises.
  • Money launderers may also try to take advantage of the corona situation. The Tax Administration has already reported money laundering based on their observations.
  • Traditional tax crimes may also increase in these circumstances. For example, VAT returns can be changed retroactively without justification to gain financial benefit.

How to choose a reliable contracting partner

In exceptional circumstances, criminals are quick to find lines of business that offer opportunities for making money. In the present case, criminal activities can revolve around consulting services or the sale of health care equipment, for example.

We have compiled a three-step checklist that you can use to assess your contracting partner’s reliability.

1) Pay attention to the price and background

  • The price of services and commodities is considerably lower than the market price.
  • The contracting partner does not have a long business history.
  • The company or its representative is not familiar with the product or the market.
  • The company is not in the Tax Administration’s registers even if its business activities are extensive.
  • The company does not give a reliable account of the workforce used for producing the services.

2) Pay attention to procedures

  • The contracting partner is represented by someone other than the persons officially in charge of the company.
  • The company’s contact persons or those in charge do not change, but the company’s contact or bank account information changes repeatedly.
  • The company does not change, but the contact persons or those in charge change and the price drops significantly at the same time.

3) Pay attention to payment arrangements

  • The seller insists that even large amounts should be paid in cash.
  • You are asked to make a payment to a third party or into a foreign bank account (e.g. tax havens).
  • You are asked to split your payment between several bank accounts.
  • Payment arrangements seem strange or suspicious.

Statistics give an up-to-date overview of the shadow economy

The Tax Administration works in close cooperation with other official authorities who combat the shadow economy and economic crime, exchanging data on all detected malpractice. Recent statistics show that the actions taken are an effective way of combatting the shadow economy and preventing economic crime.

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