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. Figure 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 planned
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 40% of all control targets are inspected annually. The annual number of food business operators inspected is showing a slowly decreasing trend, which seems to have stopped in recent years (Figure 3). Figure 2 presents the sector-specific coverage of inspections in more detail.
Results of food control are easily available online and by the doors of food business operators
Food control is carried out systematically across the country under the OIVA (Finnish Smiley) 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/en [.ﬁ]›
The results of OIVA inspections are published at the entrances of inspected food business operators and on their websites. The OIVA results of food business operators can also be found at oivahymy.fi/en [.ﬁ]›.
Results of OIVA inspections based on a scale from A to D
Figure 4 presents a breakdown of the OIVA grades of grocery stores and service locations, as well as the total grades of all inspected food business operators. So far, annual differences between the grades of different operator groups have been minor. Slightly more than 85% of the inspected targets have received the grade of excellent or good, while slightly less than 15% of targeted operators have received the grade of to be corrected or poor. 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.
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. Figure 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 grey economy – the coronavirus epidemic had a significant impact on activities in 2020
Source: National Supervisory Authority for Welfare and Health
In 2020, the coronavirus epidemic affected the alcohol administration’s activities. Restaurants were closed in spring under the act on accommodation and food service activities. Starting from summer, restaurants operated with limited opening and serving hours that were regulated in the Communicable Diseases Act and the decree issued under it. The Act was changed several times during the year. The Communicable Diseases Act was supervised partly alongside with the tasks of the Regional State Administrative Agencies’ alcohol inspectors pursuant to the Alcohol Act.
Supervision pursuant to the Communicable Diseases Act belongs to the Regional State Administrative Agencies, while its supervising and guiding are not directly within the scope of Valvira’s tasks. During the exceptional circumstances, the alcohol administration’s cooperation group, coordinated by Valvira, acted as a forum between the Regional State Administrative Agencies in exchanging information and agreeing upon guidelines. New guidelines were required frequently due to repeatedly amended and regionally differing legal provisions. Furthermore, Alpo, the alcohol administration’s online service maintained by Valvira, published information on coronavirus guidelines pursuant to the Communicable Diseases Act and the Alcohol Act.
Significant changes in the alcohol administration’s information flow
A new version of online service Alpo was released in the spring of 2020. The service’s layout was updated and its content was regrouped to make it easier to find the necessary content. Alcohol inspectors from the Regional State Administrative Agencies also started to use an interface service built by Valvira and the Grey Economy Information Unit, in which obligation compliance reports can be accessed via the Sampo desktop.
Valvira maintains an alcohol register (Allu) of licence applicants and holders pursuant to the Alcohol Act. The alcohol trade register includes information on industry operators, alcohol licences, alcohol deliveries, serving, extended serving hours, retail sales, production, import and wholesale licences, as well as the existence of licencing criteria.
The alcohol trade 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 grey economy, Valvira and the Regional State Administrative Agencies disclose individualised information from the alcohol trade register to other authorities.
The overhaul of the alcohol trade register, started in 2019, continued as planned, despite the exceptional circumstances. The digitalisation of the alcohol licence administration will bring along new operating practices. The overhaul will significantly improve the processing of information and help to obtain a more real-time overall assessment, also in the investigation of cases related to combating the grey economy. The overhauled alcohol trade register is planned to be deployed at the end of 2021.
The coronavirus epidemic was reflected in workloads – resources were allocated to the supervision of the Communicable Diseases Act
Due to the exceptional circumstances, resources of licensing and supervisory authorities were allocated not only to the processing of licences and notifications, but also to the supervision of the provisions of the Communicable Diseases Act and to providing guidance for self-employed persons and other parties in the prevention of the epidemic pursuant to the Communicable Diseases Act.
Restaurant operators developed new business ideas and sales arrangements that increased the need for guidance and supervision. In addition, the reform of the Alcohol Act was still reflected in the tasks of the alcohol authorities. In 2020, the amount of written guidance provided by alcohol inspectors from the Regional State Administrative Agencies in cases related to alcohol serving and retail sales decreased slightly from the past two years. This is explained by the partial transfer of alcohol inspectors to supervisory and prevention tasks pursuant to the Communicable Diseases Act.
In the years before the comprehensive reform of the Alcohol Act, the Regional State Administrative Agencies processed, on average, fewer than 9,000 cases related to serving or retail sales of alcohol. In 2019, there were still over 1,500 more processed cases than in the years prior to the law reform. In 2020, the number of processed cases decreased by 8,152 due to the exceptional circumstances. (Figure 1)
The exceptional circumstances caused changes in the number of serving and retail sales licences – serving decreased and retail sales increased
Over the ten years preceding the reform of the Alcohol Act, the number of licences to serve alcohol remained at a reasonably steady number, at approximately 8,300 licences. Following the entry into force of the new Alcohol Act, the number of serving licences increased. This change can likely be explained by the easier requirements for obtaining a licence for serving alcohol; for example, completing an alcohol proficiency certificate is a sufficient qualification for the responsible manager. Furthermore, licences have been applied for as secondary service for other activities. At the end of 2020, there were a total of 9,387 licences to serve alcohol (Figure 2).
The number of alcohol retail sales licences declined rather steadily in the ten years preceding the reform of the Alcohol Act. With the reform of the Alcohol Act, the total number of alcohol retail sale licences took an upturn. The change can be mostly explained by the alcohol retail sale licences obtained by establishments (for the sale of alcoholic beverages no stronger than 5.5 per cent ABV between 9 a.m. and 9 p.m.). During the exceptional circumstances, new business ideas and sales arrangements were reflected in the number of licences. At the end of 2020, there were a total of 6,311 retail sale licences (Figure 2).
Changes in the number of extended service hours due to the exceptional circumstances – fewer for indoor areas and more for outdoor areas
During the old Alcohol Act, the number of establishments granted extended service hours (service after 1.30 a.m.) in mainland Finland remained at a level of about 1,000 restaurants with extended service hours for the last ten years. At the end of 2019, a total of 1,715 establishments had extended service hours. This increase was divided evenly across Mainland Finland at the ratio of the number of restaurants and can largely be explained by the lighter requirements for extended service hours. The increase is mostly concentrated to pubs and bars that could not continue serving alcohol after 1.30 a.m. under the old Alcohol Act. At the end of 2020, a total of 1,659 establishments had extended service hours, and their number decreased less than expected (Figure 3).
Establishments have increasingly applied for extended serving hours for beer gardens and other outdoor serving areas. At the end of 2019, there were 571 licences, while the corresponding figure at the end of 2020 was 610. This increase can be explained by regulations pursuant to the Communicable Diseases Act, which only limited the customer capacity inside establishments.
High demand for retail sales licences for restaurants – the number of retail sales licences increased significantly
The Alcohol Act provides a possibility for retail sales of alcoholic beverages for establishments. Retail sales are limited to alcoholic beverages with at most 5.5 per cent ABV between 9 a.m. and 9 p.m. At the end of 2019, a total of 889 establishments had a retail sales licence, with the corresponding figure at the end of 2020 being 1,304. Regulations during the exceptional circumstances enabled the takeaway sale of alcoholic beverages, even though the stay of customers inside restaurants was restricted at the same time.
Other licence types allowed by the Alcohol Act remain on the sidelines
The Alcohol Act enables obtaining a licence for the retail sales of craft beers of no more than 13 per cent ABV. In 2019, a total of 69 places of production had a licence, with the figure increasing to 78 by the end of 2020.
A licence to serve alcohol can be applied for without licensed premises for catering activities in pre-approved serving areas. In 2019, a total of 73 operators had a licence to serve alcohol without fixed licensed premises, and the figure increased to 86 by the end of 2020.
A total of 315 serving areas were approved for catering operations in 2019. In 2020, there were 371 approved serving areas. It would appear that the operating model for arranging temporary serving enabled by the Alcohol Act – such as in rented public festive premises – did not achieve great popularity. In 2020, meeting restrictions had an impact on these types of activities.
Towards systematic self-supervision and its supervision – the coronavirus epidemic set challenges for supervision
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 for the Regional State Administrative Agencies on supervising the serving and retail sales of alcohol.
The Alcohol Act emphasises the importance of self-supervision, and requires the licence holder to draw up a self-supervision plan to support its operations for the serving and retail sales of alcoholic beverages. A good self-supervision plan can prevent many practical problems, and it is important that the licence holders bear the responsibility of their self-supervision obligation. In 2020, regulations issued due to the exceptional circumstances had to be addressed in self-supervision plans.
In 2019, the Regional State Administrative Agencies conducted 3,931 inspections of licenced premises and alcohol retail sales outlets. In 2020, the number of inspections decreased to 1,859 due to the clarification of irregularities related to the exceptional circumstances. Repeatedly and regionally amended regulations set separate challenges for the content of self-supervision plans and for their supervision. However, licence holders and supervisors succeeded in fulfilling the requirements set for self-supervision plans, despite the exceptional circumstances.
In 2019, the Regional State Administrative Agencies sent a total of 366 guidance letters, while the total for 2020 was 213. The number of administrative sanctions issued under the Alcohol Act, such as warnings, sanction fees and licence revocations was 168 in 2019, decreasing to 144 in 2020.
Supervision focuses on marketing
Valvira supervises the national marketing of alcoholic beverages, while the Regional State Administrative Agencies supervise regional marketing. Decreases in normal business activities increased the interest of entrepreneurs in the alcohol sector to develop new operating practices and marketing activities, which is why the number of queries and guidance related to the marketing provisions of the Alcohol Act remained high. Licence holders were particularly interested in the indirect advertising of alcoholic beverages in conjunction with non-alcoholic products, as well as in tastings and events. In addition, many queries were related to marketing in social media services and the marketing of strong alcoholic beverages.
In 2020, the supervision of the alcohol authorities focused on the improvement of self-supervising and the marketing of alcoholic beverages. The project-like supervision carried out by the Regional State Administrative Agencies and Valvira, started at the end of 2018, focused on the websites and social media accounts of licence holders. During 2020, Valvira sent several guiding letters and requests for clarification, and met several licence holders. For some licenc holders, further measures related to the supervisory project are still in progress.
During supervisory inspections carried out by the Regional State Administrative Agencies, guidance was also provided regarding advertising. In 2020, the Regional State Administrative Agencies provided operators with guidance in advertising issues on 23 occasions as part of the project-like supervisory activities in addition to guidance provided during inspection visits. In Valvira, the marketing supervision project concentrated on providing guidance for alcohol manufacturers and wholesalers. Guidance was given on 214 occasions. The current exceptional circumstances had a significant impact on supervision.
In earlier years, the supervision of the marketing of alcoholic beverages has comprised, as a rule, the processing of reports received by the authorities, and providing guidance for licence holders based on them. The most significant conclusion of the project-like supervisory activities is that, most commonly, the reason for neglect of the marketing regulations was the ignorance of the licence holders due to the complexity of the regulations.
The grey economy was combated effectively, despite the exceptional circumstances
Valvira guides the supervision of the serving and retail sales licences of the Regional State Administrative Agencies nationwide. To assess the impact of measures taken to combat the grey economy, supervision focuses on such issues as measures to ensure the preconditions for business operations by licence holders.
Grey economy supervision measures of the Regional State Administrative Agencies in 2020 are presented in Figure 4. The figure shows, by region, the number of requests for clarification sent to licence holders, the payment plans agreed, information on the revocation of licences for the serving or retail sale of alcohol, bankruptcies, debt adjustment or restructuring measures, and the total outstanding taxes paid in euros.
Since 2012, Valvira has compiled statistics of measures related to combating the grey economy in a comparable way. In the previous years, an average of 171 requests for clarification were made, and as a result, an average of EUR 1.5 million in outstanding taxes were paid. In 2019, a total of 182 requests for clarification were made, and as a result, a record of EUR 2.4 million of outstanding taxes were paid. In 2020, a total of 86 requests for clarification were made regarding exceptional regulations due to the coronavirus epidemic, and as a result, approximately EUR 1.3 million of outstanding taxes were paid.
Combating the grey economy is but one part of the extensive responsibilities of the alcohol administration. In 2020, the alcohol administration’s activities to combat the grey economy can be regarded as highly successful, considering the regulations due to the exceptional circumstances and the payment and operating arrangements granted for entrepreneurs, as well as the distribution of the alcohol administration’s tasks and the decrease in personnel resources.
A careful selection of targets and close cooperation between the authorities help to effectively achieve good results In particular, cooperation between the Tax Administration’s Grey Economy Information Unit and the Taxation Unit’s steering unit has worked well in safeguarding equal opportunities for traders.
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 they were continued in 2017, 2018 and 2019. This practice has helped to prevent irregularities. In 2019, there were no notifications giving reason to suspect a registration offence.
Enhanced control was targeted at notifications of changes in limited liability companies or cooperatives with details of a new Board of Directors, managing director or building manager. The aim of enhanced processing is to identify whether the decision issued is appropriate. If certain criteria were met, PRH requested a copy of the deed of sale of shares to be attached to the notification or called the company to verify the accuracy of the notification.
In 2020, the systematic enhanced control of notifications was discontinued, partly for resource-related reasons, and partly because the use of electronic services increased clearly. In the future, enhanced control will be conducted a few times a year by means of spot checks. During the enhanced control conducted in October 2020, there were no notifications giving reason to suspect a registration offence.
Source: Uusimaa Centre for Economic Development, Transport and the Environment
An entrepreneur’s residence permit is granted in two stages: the Uusimaa Centre for Economic Development, Transport and the Environment (ELY) makes partial decision before the final decision is made by the Finnish Immigration Service. The partial decision is made assessing the profitability of companies and the preconditions for the livelihoods of permit applicants.
In 2020, the Uusimaa ELY Centre made a total of 1,055 partial decisions, of which 47% were negative. The ratio of negative partial decisions decreased by 3.5% from the previous year. Due to the coronavirus situation, the number of applicants for the first entrepreneur’s residence permit decreased significantly. Furthermore, more positive partial decisions have previously been made for subsequent permits than for the first residence permits.
Many reasons for negative decisions
A negative decision is not a direct indication of shadow economy activities, while some of these situations may involve the shadow economy and economic crime as underlying factors. The most common reasons for negative partial decisions include deficiencies in complying with statutory obligations, irregularities in the payment of wages, deficient or erroneous accounting, or a non-viable business idea and lack of profitability, which mean that the applicant cannot ensure their livelihood by means of their business operations.
The Uusimaa ELY Centre works with other authorities to combat the shadow economy and economic crime. Any deficiencies and neglects discovered during the processing of entrepreneurs’ residence permit applications were reported to the Finnish Immigration Service, the Regional State Administrative Agencies, the Finnish Tax Administration and the Police of Finland.
Business activities carried out without a proper permit, external services related to applying for a residence permit and investment activities are phenomena that were highlighted in negative partial decisions. More businesses were started without a residence permit than in the previous year. In its assessment, the ELY Centre cannot consider any activities carried out without a proper permit in favour of the applicant. Services provided by external parties subject to a charge also increased in conjunction with entrepreneurs’ residence permits. Furthermore, applications included business activities that were interpreted to comprise investment activities in practice, and not employment in business activities in accordance with the residence permit type.
Negative partial decisions by nationality
Applications for entrepreneurs’ residence permits were received from citizens of 69 countries. The largest number of applications was received from citizens of Russia, China and Nigeria. Like in previous years, Russia and China were the most common citizenships in entrepreneurs’ residence permit applications. During 2020, the number of applications submitted by Nigerian citizens increased clearly. Figure 2 presents the ten citizenships that received the most negative decisions. The ratio of negative partial decisions was the highest in applications submitted by US, Indian and Nigerian citizens. Approximately one in four applicants for the first entrepreneurs’ residence permit had another permit (or permit application) in the background. The most common of these were the employed person’s residence permit, student’s residence permit, permanent residence permit and other work.
Negative partial decisions by principal activity
Applications for entrepreneurs’ residence permits include companies in a large range of sectors. In 2020, applications included more than 200 different principal activities. In terms of quantity, the largest principal activities were the restaurant sector (restaurants/cafeteria-restaurants), other postal, delivery and courier activities, and property cleaning. During 2020, the number of applications submitted by food couriers, in particular, increased clearly. Figure 3 presents the ten principal activities that had the most negative partial decisions. The ratio of negative partial decisions was the highest in the following sectors: motels, hostels and similar accommodation providers, motor vehicle servicing and repair, and other business management consulting. In negative partial decisions, some 10% involved business activities that were still in the planning phase, with the company not yet having been registered.