Key figures in the prevention and investigation of tax fraud
Source: Finnish Tax Administration
In the Finnish Tax Administration, the prevention of the grey economy focuses on the prevention and investigation of tax offences using a variety of tools. This work is done in connection with business registrations and the control of the accuracy of declaration data. Effective disruption of fraudulent activities is the key. Operators with a significant tax risk are subjected to a tax audit as a matter of principle. The audit can also be carried out simultaneously with a pre-trial investigation. Some of the employees at the Finnish Tax Administration specialise in the prevention of more serious forms of grey economy. The Finnish Tax Administration classifies as grey economy targets all tax cases that are considered for reporting to the police. Different types of preventive work with stakeholders is also ongoing. Exchange of information affecting taxation between the tax authorities of different countries and international cooperation at large play an important role in the Finnish Tax Administration’s fight against the grey economy.
The Finnish Tax Administration also works with various authorities to combat tax offences and other forms of economic crime. Control events focus more specifically on the activities of companies in a particular sector. This cooperation ensures a comprehensive approach to the control, identification, and prevention of the various types of economic crime.
Dishonesty occurs throughout business life
Tax control measures uncover grey economy activities in all fields of business, but most often in the construction, cleaning, and restaurant industries, as well as in car dealerships. Grey economy activities have also been uncovered through the control of e-commerce and foreign transactions.
Turnover of audited grey economy businessesMore than €10 million 1,9 %
€2–10 million 7,5 %
Less than €2 million 57,3 %
Not known 33,2 %
Turnover for the last year audited for income tax purposes; if not available, turnover for 2019
The Finnish Tax Administration does not have information on the turnover of all grey economy actors, including foreign companies and companies that have been reported dormant or dissolved. This category also includes natural persons.
Control results in 2021
In euro terms, the results in the prevention of the grey economy have been steadily improving, despite the fact that the number of tax audits has decreased. This is due to the successful risk management of the Finnish Tax Administration and the successful selection of targets. Meanwhile, other means of control have been developed. For the employees specialising in more serious grey economy, 94% of the audited cases resulted in taxes being levied and around 86% in consideration for reporting to the police.
The Tax Administration’s bankruptcy petitions in 2021
In 2021, the number of pending bankruptcy petitions increased by 385 from 2020. The Tax Administration accounted for 43% of all petitions in 2021. The Tax Administration prepared 333 more petitions than in the previous year.
The Bankruptcy Act was amended temporarily between 30 May 2020 and 31 January 2021 so that declaring a debtor bankrupt as petitioned by the creditor was limited.
In total, 960 new criminal cases were instituted during 2021. Included in the number are matters reported to the police by the Tax Administration, as well as criminal matters in which the Tax Administration is an injured party but the pre-trial investigation is based on another party's report.
A criminal case may contain several criminal offences, which is why the number of criminal offences is higher than the number of criminal cases. For example, an accounting offence is commonly associated with tax fraud. The focus of criminal cases involving the Tax Administration is on aggravated tax frauds (Chart 2a).
Judgments in criminal cases according to court
The number stands for criminal cases involving the Tax Administration in which a judgment was rendered in 2021. It is not the same as the total number of judgments rendered, as more than one criminal matter may be considered under each criminal proceeding and sentencing phase (Chart 2b).
Tax debt – the amount has decreased after the increase during the coronavirus pandemic
The statistics show all tax debts, regardless of whether they are accumulated in the shadow economy or by other taxable entities. The amount of tax debt increased significantly in 2020 as a result of coronavirus measures. At the end of 2020, tax debt peaked at nearly €5 billion. Since then, the amount has decreased to €3.4 billion in two years, being only less than €400 million higher compared to the pre-pandemic situation. The steady decrease in tax debt can be explained by the Finnish Tax Administration’s payment arrangements with lighter conditions which involved the majority of new tax debt accumulated during the coronavirus period. Currently valid payment arrangements with lighter conditions will end during 2022 and 2023.
In Figure 1 (tax debt by main category), the amount of tax debt on 31 July 2022 is presented in main categories following the largest tax types. Figure 2 shows the breakdown of tax debt under the main categories in more detail, e.g. the division of excise duty debt between different types of excise duties. Figure 3 presents the total amount of tax debt on the review date of 31 July 2022. The figures can be filtered by tax year to identify the amount of unpaid taxes for each tax year.
The information exchange between the authorities is at the core of the fight against the grey economy. It is difficult to make the right decisions without sufficient information on the financial standing of a subject or an applicant. The Compliance Report is an updated summary of the essential records held by the authorities. The Compliance Reports are issued by the Grey Economy Information Unit. The reports help authorities target and execute their control measures. The exchange of information between the authorities must always be based on the law.
The information on the Compliance Report is illustrative of the level of compliance of an organisation or a person with statutory obligations. The report includes information on activities, financial standing and compliance with obligations related to taxes, statutory pension, accident insurance and unemployment insurance contributions and fees levied by Customs.
The information on the Compliance Report is mostly based on information submitted by the subjects themselves. The report includes payroll information obtained from the Tax Administration, pension contribution information obtained from the Finnish Centre for Pensions and Customs information. The report also includes a possible extract from the enforcement register and information on bankruptcy and restructuring proceedings. The reports can be requested and received through an automated interface.
Act on Grey Economy Information Unit [.ﬁ]› (in Finnish)