Products, services and equal competition
Source: Finnish Food Authority
Every grocery store, restaurant, café and establishment that produces foods (food business operator) is a separate target of food control. If a food business operator engages in more than one food business activity, it is registered in the category of its principal activity. The category of “food service” includes cafés, restaurants and mass caterers. Chart 1 presents the number of food control targets. There is strong annual growth in the number of primary production operators included in the statistics because the registration of this group is still incomplete.
Food control is risk-based and systematic
Risk-based food control means that high-risk food business operators are subject to greater control than low-risk operators. For instance, a food establishment that produces meat products is classified as a higher-risk food control target than, say, a kiosk that sells packaged foodstuffs. In food control, the control targets are categorised into various risk categories, and the control frequency of each group is determined on the basis of the risk categorisation. For this reason, some control targets are inspected several times a year, whereas other control targets may go several years between inspections. About 35–45 per cent of all control targets are inspected annually. The declining trend shown in chart 2 is interesting – a smaller group of food business operators seems to be inspected each year. Chart 3 presents the sector-specific coverage of inspections in more detail.
Results of food control are easily available online and by the doors of food establishments
Food control is carried out systematically across the country under the OIVA system. The food control authority inspects selected aspects of the control target during each inspection. The results are published as an OIVA report. There are four possible results: excellent, good, to be corrected and poor.
OIVA scale. Picture: oivahymy.fi
The results of OIVA inspections are published at the entrances of inspected food business operators and on their internet sites. The OIVA results of food business operators can also be found at oivahymy.fi (in Finnish and Swedish).
Results of OIVA inspections based on a scale of A to D
On average, slightly more than 85 per cent of control targets inspected received an excellent or good result. Slightly under 15 per cent of inspected companies received a grade indicating a need for corrections or a poor result. If a food business operator’s result is poor or indicates a need for corrections, the company will be inspected again at a later date.
Chart 4 presents a breakdown of the OIVA grades of all food control targets and separate breakdowns for grocery stores and service locations. A comparison of grocery stores and service locations (cafés, restaurants, mass caterers) shows that about 85 per cent of grocery stores achieved a result of excellent or good, while about 87 per cent of service locations achieved an excellent or good result.
Administrative coercive measures are taken to address activities that do not comply with the law
Food control authorities are obligated to ensure that any situation that does not comply with the law is rectified. The Food Act lays down administrative coercive measures that are to be employed when necessary. Chart 5 presents the situations in which an administrative procedure concerning coercive measures has been initiated, by the type of coercive measure required. The most commonly employed administrative coercive measure is an order. An administrative procedure concerning an order was initiated in slightly more than 250 cases on average. At present, no statistics are available on requests for pre-trial investigations made to the Police or criminal convictions involving the food sector.
It is possible that being driven into financial difficulties increases the risk of a failure to comply with statutory obligations in the food business, too. This is indicated by a report jointly drafted by the Grey Economy Information Unit and the Finnish Food Safety Authority (as from 1 January 2019: the Finnish Food Authority).
The alcohol administration combats the shadow economy – the implementation of the new Alcohol Act required targeting resources
Source: National Supervisory Authority for Welfare and Health Valvira
Valvira maintains a register of licence applicants and holders pursuant to the Alcohol Act. The register is used to produce analysed information on the supervision of serving and retail sales, the reliability of an entrepreneur, and the determination of the entrepreneur’s financial capabilities. The information also serves as the basis for the production of official statistics on alcohol as well as information and register services related to alcohol issues. To combat the shadow economy, Valvira and the Regional State Administrative Agencies disclose individualised information from the alcohol trade register to other authorities.
The alcohol trade register includes information on industry operators, alcohol licences, alcohol deliveries, serving, extended serving hours, retail sales, production, import and wholesale licences and the existence of licencing criteria.
The reform of the Alcohol Act challenged the authorities and increased the number of licences
The comprehensive reform of the Alcohol Act had to be implemented on a tight schedule. To implement the new Alcohol Act, the resources of the permit and supervision authorities were targeted at processing licence and notification matters as well as providing guidance for entrepreneurs and other operators. The comprehensive reform of the Alcohol Act was clearly evident in the tasks of the alcohol authorities. Compared to an ordinary year, the Regional State Administrative Agencies handled over 30 per cent more alcohol matters than in 2018.
The performance of the Regional State Administrative Agencies is presented in chart 1. The greatest increases in measures performed by the Regional State Administrative Agencies are due to changes in extended serving hours practices and the possibility of applying for a retail sales licence for licenced premises.
Growth in the number of serving and retail sales licences
The number of alcohol retail sales outlets declined rather steadily in the ten years preceding the reform of the Alcohol Act. In 2007, there were 6,744 retail sales outlets in Mainland Finland. By 2017, the number of retail sales outlets had decreased to 5,384. The reform of the Alcohol Act increased the total number of retail sales outlets to 5,895. The major factor behind this increase was retail sales licence applications for licenced premises. The number of retail sales outlets saw year-on-year growth of almost 10 per cent (Chart 2).
During the ten years prior to the reform of the Act, the number of licenced premises remained at around 8,300, but rose to 8,453 in 2017 and further to 8,919 in 2018 after the reform. The number of licences grew by about 5.5 per cent from the previous year (Chart 3).
Following the reform of the Alcohol Act, all licenced premises in Mainland Finland were automatically permitted to serve all kinds of alcoholic beverages. This meant that about 2,100 licenced premises were allowed to include strong alcoholic beverages in their selections.
Number of extended serving hours licences increases by more than half
While the old Alcohol Act was in force, the number of extended serving hours licences remained at around the same level of 1,000 for almost ten years. In 2018, the number of restaurants with extended serving hours grew to 1,640 (Chart 4). This growth was evenly spread around Mainland Finland in proportion to the number of restaurants. The almost 60 per cent growth in extended serving hours is explained largely by the relaxed criteria for extended serving hours. More extended serving hours licences were also sought for terraces and other outdoor areas. In 2017, slightly over 100 outdoor areas had extended hours serving licences; at the end of 2018, they numbered 486 in total.
High demand for retail sales licences for restaurants
The new Alcohol Act also enables licenced premises to engage in retail sales of alcoholic beverages if they apply for a licence for this. However, retail sales are limited to alcoholic beverages with 5.5 per cent ABV between 9 a.m. to 9 p.m.
At the end of 2018, 687 licenced premises had a licence to engage in retail sales of alcoholic beverages, representing about 8 per cent of licenced premises. It remains to be seen how financially profitable retail sales on licenced premises will be. There are already indications that the number of retail sales licences applied for by restaurants may decline after the initial excitement has receded.
Other new types of licences are minor in amount
The new Alcohol Act permitted retail sales of craft beer under a licence. At the end of 2018, 59 breweries had a licence to sell craft beers with a maximum of 13 per cent ABV.
Another new opportunity ushered in by the new Alcohol Act was to apply for a serving licence without a fixed serving area for catering-type activities in preapproved serving areas. At the end of 2018, 41 operators had a serving licence without a fixed serving area.
A total of 186 serving areas were approved for catering operations in 2018. It would appear that the operating model for arranging temporary serving enabled by the new Alcohol Act – such as in rented public festive premises – did not achieve great popularity in 2018.
In supervision, the focus is shifting to self-supervision and its enforcement
The Regional State Administrative Agencies supervise the serving and retail sales of alcoholic beverages in their area. Valvira attends to nationwide supervision and the provision of guidance to the Regional State Administrative Agencies on supervising the serving and retail sales of alcohol.
In 2018, the Regional State Administrative Agencies conducted 3,502 inspections of licenced premises and alcohol retail sales outlets. The number of inspections declined by 11 per cent year-on-year.
The number of administrative sanctions – such as reminders and cancellation of licences – imposed on the basis of the Alcohol Act also decreased. Whereas the Regional State Administrative Agencies imposed a total of 376 administrative sanctions in 2017, the number in 2018 was less than 100.
The new Alcohol Act emphasises the importance of self-supervision and more matters are now in the scope of self-supervision. Supervision focuses on the implementation of the law with a steering approach. Field supervision has noted that there are great deficiencies in systematic self-supervision in many respects in serving and particularly in retail sales.
Licence holders must bear their responsibility for the self-supervision obligation introduced by the new Alcohol Act. Having a good self-supervision plan can prevent many practical problems in one’s own operations.
Combating the shadow economy was relegated to a minor role in supervision
Valvira monitors the supervision of the serving and retail sales licences by the Regional State Administrative Agencies nationwide. To assess the impact of measures taken to combat the shadow economy, supervision focuses on issues such as measures to ensure the preconditions for business operations by licence holders. The anti-shadow economy supervision measures of the Regional State Administrative Agencies in 2018 are compiled in chart 5. Performance monitoring includes the number of measures concerning, for instance, requests for clarification sent to licence holders, agreed payment schemes, information on the cancellation of serving and retail sales licences, bankruptcies, debt adjustment and restructuring proceedings, and tax debts paid (in euros).
In 2018, the number of anti-shadow economy measures declined by almost a third compared with 2017 and the total sum of tax debts paid was down 17 per cent, only about EUR 240,000. When taking into consideration both the required implementation of the new Alcohol Act and the reduction in personnel resources in the alcohol administration, the operations to combat the shadow economy can be considered to be extremely successful. Careful selection of targets ensures effective results.
Source: The Ministry of Economic Affairs and Employment
The National Board of Patents and Registration (PRH) is responsible for maintaining and monitoring the accuracy of information submitted to the Trade Register. The number of Trade Register offences brought to light and of Trade Register submissions investigated on a risk-basis are indicative of the possible amount of shadow economy activity.
PRH launched enhanced investigations of Trade Register submissions in March 2016, and these continued in 2017 and 2018. This practice has helped prevent irregularities.
In 2018, a total of 24,832 notifications of changes in limited liability companies or cooperatives were received with details of a new Board of Directors, managing director or building manager. Of these notifications, 1,443 were referred to enhanced investigation to determine whether the reported decision was appropriate. In 106 of these cases, PRH requested a copy of a deed of sale or called the company to verify the accuracy of the notification.
In 2018, one notification was discovered in which there was reason to suspect a registration offence. The case is being investigated by the Police.
The residence permit for self-employed individuals is replaced by the residence permit for entrepreneurs
Source: Centre for Economic Development, Transport and the Environment
The Aliens Act was amended on 1 April 2018 to the effect that the residence permit for self-employed individuals became the residence permit for entrepreneurs. The permit is granted in two stages: the Centre for Economic Development, Transport and the Environment makes an interim decision before the final decision is made by the Finnish Immigration Service. The Uusimaa Centre for Economic Development, Transport and the Environment handles these permits for the whole of Finland. In the period from 1 April – 31 December 2018, the Uusimaa Centre for Economic Development, Transport and the Environment made a total of 464 interim decisions, of which 43 per cent were negative (Chart 1).
It is the task of the Uusimaa Centre for Economic Development, Transport and the Environment to assess the profitability of companies and the preconditions for the livelihoods of permit applicants. Negative interim decisions have usually been based on deficiencies in complying with statutory obligations, irregularities in the payment of wages, deficient or erroneous accounting, a non-viable business idea and lack of profitability, which mean that the applicant cannot ensure their livelihood by means of their business operations.
Negative interim decisions by nationality
Applications for residence permits for entrepreneurs were received from the citizens of 44 countries. The greatest number of negative decisions concerned citizens of Russia, China and Turkey. Chart 2 presents negative interim decisions by nationality during the period 1 April-31 December 2018. After the amendment of the Act, the number of applications from Russia in particular has risen. The companies of Chinese and Russian applicants involve larger amounts of capital than applications from other countries. The greatest number of negative decisions have been made regarding applications from citizens of these countries, as the operations in question have been deemed in practice to constitute investment activities rather than employment through corporate activity.
Negative decisions most commonly concern restaurants
Applications for residence permits for entrepreneurs include companies in a large range of sectors. The largest group comprises companies in the restaurant sector. Chart 3 presents the ten most common sectors in negative interim decisions from 1 April-31 December 2018. Business management consulting has become the second most common field among negative interim decisions. Individual operators that professionally produce appendices for residence permit applications have been found in this field of business. The greatest number of irregularities detected In the restaurant sector concern the payment of wages and compliance with obligations. This information does not directly point the finger at shadow economy activities, but some of these situations may involve the shadow economy and economic crime as underlying factors.