Hundreds of associations would have been denied government grants of over €100 million if their financial backgrounds had been examined
Tax Administration Bulletin, 8/19/2025Government grants and money collection permits are still granted to parties with payment defaults, tax debt or business prohibitions. Recent reports by the Grey Economy Information Unit show that if financial reliability is not assessed, public funds can be inadvertently used to support grey economy.
In 2023, awarding government grants totalling up to €124 million to foundations and associations could have been avoided if the financial reliability of both the organisations and the people responsible for them had been thoroughly examined. All in all, every fifth association and every second foundation might have been left without the financial support they applied for.
Further, in 2023, over €0.5 million were paid in grants to associations that had a person in charge who had been barred from engaging in business activities.
In its recent report, the Grey Economy Information Unit (HTSY) assesses how the amendments that were proposed to the Act on Discretionary Government Grants in 2022 would have affected the grant decisions made in 2023. The financial reliability of the organisations that were awarded with grants and of the persons responsible for them and any businesses associated with them were examined.
"There are nearly a thousand associations and foundations in Finland with such persons in charge whose personal or business finances are a mess. This increases the risk that the association also operates in the grey economy and that taxes and charges are left unpaid. Combating the grey economy also includes safeguarding public funds. Do we want to use our tax revenue to support associations and foundations like these?" asks Janne Marttinen, Head of the Grey Economy Information Unit at the Finnish Tax Administration.
Millions of euros awarded in grants without sufficient examination of financial backgrounds
In 2023, around 4,200 associations and 300 foundations were awarded with a total of €300 million in business support, employment subsidies or other such financial support.
The effective Act on Discretionary Government Grants does not require that authorities granting financial support should examine the financial reliability of the applicants or persons responsible for the applicant organisations. Some grant providers have their own regulations regarding the examination of financial reliability, but the obligation is not laid down in law.
New amendments are currently being prepared for the Act on Discretionary Government Grants to prevent the grant of financial support if the applicant, people responsible for the applicant organisation, or companies associated with persons in charge have failed to pay their taxes or meet their other obligations under public law.
"In the use of public funds, we must pay attention to risk management. Our view is that when we examine the backgrounds of grant applicants, it encourages them to act correctly and can also prevent later problems," says Marttinen.
A proposal on the amendment of the Act on Discretionary Government Grants is scheduled to be passed on to the Parliament in autumn 2026.
Financial reliability as a precondition for the money collection permit
Another report by the Grey Economy Information Unit looked into the financial reliability of associations and foundations that had been granted a money collection permit, and of the people responsible for them.
If financial reliability of the people in charge had been a precondition for the issue of a money collection permit in March 2025, the applications of around 15 percent of the organisations requesting permits could have been rejected.
"Cases of money collection scams have come to light. Money collection permits are issued by the National Police Board of Finland, and although they can reject an application based on a criminal conviction, compliance with public obligations, such as tax debt or assessment by estimation, is currently not taken into account. A precondition for a money collection permit should be the financial reliability of both the organisation applying for the permit and the people responsible for the organisation," says Marttinen.
Lack of tax information makes assessing financial reliability difficult
It is difficult to form a comprehensive or up-to-date picture of associations' finances because they are not always required to file tax returns or submit their financial statements to the Register of Associations. According to the Grey Economy Information Unit reports, as many as 40 percent of the associations did not file a tax return in tax years 2020–2022, either because they did not have any taxable activity or for another reason.
Due to lack of recent tax information, there is no financial information on a large number of associations that could be used to assess their financial reliability.
"It is therefore important to expand the assessment of financial reliability to people responsible for the associations and to any companies associated with them," says Marttinen.