Studies on the shadow economy
Are Estonian companies used as tools of the shadow economy in Finland?
Finns have many links to the Estonian business world. However, merely establishing a company in Estonia does not confer tax benefits if its operations are led from Finland.
Finns have many links to the Estonian Business Register
The Tax Administration’s Grey Economy Information Unit has investigated how Estonian companies are involved in the shadow economy. The study delved into issues such as the Finnish connections of the responsible officers of companies included in the Estonian Business Register. During the period 1999–2018, the number of Finnish citizens in the Estonian Business Register almost tripled. In 2018, more than 8,000 Finnish responsible officers were included in the Estonian Business Register.
The shadow economy takes the form of many activities
Shadow economy activity related to Estonian companies includes the concealment of income, VAT fraud, failure to keep accounting records, and moving to Estonia on paper even though the individual, in fact, lives in Finland.
One indication of shadow economy risks is a situation in which all the responsible persons of a company are Finnish and they all live in Finland. More than 3,000 companies meeting these criteria were found.
Comparing information from the Finnish Tax Administration with the Estonian Business Register revealed almost 300 Finns who live in Finland and have no income according to the Finnish tax records, but who serve as responsible officers of an Estonian company. The lack of taxable income might indicate deliberate concealment of income, a typical shadow economy activity.
Estonia does not provide tax benefits when business operations are carried out in Finland
Merely establishing a company in Estonia does not confer tax benefits if it engages in operations in Finland and has a so-called permanent establishment here – that is, if it has its headquarters or an office in Finland. In that case, the permanent establishment of the foreign company is taxed in accordance with Finnish legislation. In addition, a permanent establishment is subject to Finnish work legislation, including the terms and conditions of remuneration.
Car sales and imports have been found to be vulnerable to the shadow economy.
Does the car business suffer from under-the-counter sales?
Selling under the counter is one of the most common ways to evade taxes in the car business. Companies can neglect to report a part of their sales, but there are also companies that do not report their activities to the Finnish Tax Administration at all. Extensive car trade by a private individual may also, in reality, constitute business activity in reality. Reviewing car tax returns provides hints of undeclared business carried out by private individuals.
Purchases from other EU countries are becoming more common, but many car dealers only report part of them to the Tax Administration
More and more companies in the car business buy cars from other EU countries as purchases of goods including VAT. The number of purchases reported by companies has increased by nearly 36% during the past five years. Out of the companies that have made purchases of goods within the EU, nearly one third report making a clearly lower number of purchases compared to the sales to the same parties reported by the European seller. The differences may be partly due to errors in reporting, but they may also be due in part to intentional failures to report and the shadow economy.
Marginal taxation is a tax risk in car imports
The marginal taxation method can be used in the sale of used cars. The possibility of misusing the procedure increases the risk of shadow economy. The sale of a car subject to VAT may be processed incorrectly in the company’s bookkeeping as sale subject to marginal taxation. This reduces the tax on the sale, because in the marginal taxation method, the VAT on the sale is only calculated for the share of gross profit.
Simple marginal tax fraud
Taxi legislation poses challenges in combating the shadow economy
Legislation governing the taxi business was thoroughly revised in summer 2018. The revised legislation has ushered in new challenges in tackling the shadow economy.
The three key aspects that hinder efforts to tackle the shadow economy are:
Logical explanation for the decline in VAT revenue
It has been speculated in public discussion that VAT revenues have declined due to the shadow economy. The Tax Administration’s Grey Economy Information Unit carried out a study to investigate this issue. There are many natural explanations for the decline in VAT revenue – the major reasons are the growth in outsourcing and equipment procurements by new entrepreneurs.
The study also examined tax revenues in this field of business compared with an affiliated business, goods transport by road. The study revealed that the tax revenues generated by the taxi business are relatively moderate.
The taxi business in transition
Taxi entrepreneurs who neglect their public obligations pose a challenge of their own. The number of companies with tax debts has surged after the legislative reform. Steps are being taken to address this issue. The Finnish Transport Safety Agency may revoke the transport permits of taxi entrepreneurs who neglect their obligations.
Information from payment processors would enable the tax authorities to form an overall picture of e-commerce business and control compliance with tax obligations. The largest share of payments for European consumers’ purchases from online stores outside the EU are handled through payment processors. Without information on these transactions, it would be difficult for the authorities to identify online stores in third countries and their sales volume.
International agreements, legislation and confidential co-operation with the actors involved play an important role in accessing payment information. Accordingly, the proposed amendments to the VAT Directive state that payment processors should provide payment information to the tax authorities of various countries in order to prevent VAT fraud in cross-border e-commerce.
Payments to online stores most often end up in the EU
Card payments received by the largest online stores in third countries are often transferred from consumers to actors in the EU. This makes it more difficult to see the full picture of how much online trading takes place in third countries. Two-thirds of payments to online stores in third countries are first transferred to Europe. Only a third of payments are transferred directly to third countries.
There are also great differences in how payments to online stores in various countries are transferred. Almost all payment transactions to Chinese online stores and 70 per cent of payments to US online stores are first transferred within Europe. On the other hand, payments to EFTA countries outside the EU are transferred directly to the country in which the online store is located.
Concealment of income and assets from the tax authorities has become more difficult during the past few years. Consequently, individuals who were earlier utilising bank secrecy for tax evasion purposes have been trying to find new ways to evade taxes.
The amount of assets transferred to life assurance contracts, essentially to foreign ones, has substantially increased. Life assurance contracts can be utilised for tax planning, tax avoidance and tax evasion purposes in several ways. In addition, artificial arrangements with intention to obtain status as a person with limited tax liability in Finland have been detected in tax control more often.
One type of investment-related tax evasion phenomena has been an arrangement in which nominee-registered shares are acquired by Finnish residents via foreign service providers, and after the shares are sold the capital gains have not been reported to the tax authorities. Moreover, the tax at source on dividends is possible to avoid by means of several arrangements.
Change initiated by the revolution in exchange of information
Arrangements based on the utilisation of bank secrecy and offshore companies primarily remained outside the scope of tax control until the 2010s. In addition to tax evasion, bank secrecy had enabled illegal insider trading and the concealment of assets from enforcement authorities. However, after the financial crisis tax havens were pressured to conclude tax information exchange agreements with other countries and, further, the bank secrecy laws started to crumble. A few years later, due to the legal amendments on comparison data audits, the Finnish Tax Administration – for the first time – acquired adequate tools to control cross-border money transactions as well as the use of foreign credit cards in Finland. Furthermore, multilateral automatic exchange of information based on the OECD’s Common Reporting Standard (CRS) began in 2017, and it has provided an unforeseen amount of data based on foreign investment-related income for tax control purposes.
The Tax Administration has allocated more resources towards tax control over cross-border transactions. Consequently, a considerable number of tax evasion arrangements have emerged during the past few years.
The need for development of treaty network and national legislation continues
Some significant financial centres are still staying outside the CRS, as well as the agreement of mutual assistance for the recovery of tax claims. Furthermore, there is the need to close a few essential loopholes in Finnish national legislation. For example, the avoidance of tax at source on dividends by making transactions round the ex-dividend date would be possible to block by means of legal amendments as well as by re-negotiating tax treaties. Furthermore, in order to intervene in tax evasion arrangements via holding companies registered abroad, Finland should determine the tax residence of companies as based on the place of effective management instead of the place of incorporation. In addition, the introduction of a new tax targeted at increasing the value of assets liquidated after moving away from Finland would prevent artificial tax avoidance arrangements that are intentionally made to obtain status as a person with limited tax liability in Finland
Companies with Estonian responsible persons have more irregularities than Finnish-owned companies
Estonian-owned companies registered in the Finnish Trade Register have tax-related reporting and payment irregularities more frequently than Finnish-owned or other foreign-owned companies. A far greater share – almost half – of Estonian-owned companies operate in the construction sector, where the risks of shadow economy are high.
Almost half of Estonian-owned companies have tax arrears. The average amount of the tax arrears is more than threefold that of all Finnish companies.
Estonian-owned companies are often short-lived and do not accumulate capital
Of the companies founded in 2013, less than half were still in business in 2018. Two thirds of the Finnish-owned companies established at the same time were still operational in 2018.
Business operations of companies founded in 2013 in the year 2018.
Debtors are often faced with nothing but the sham façade of the company. The companies have no restricted equity. In half of the cases, the equity ratio of the company is not known or it is less than ten percent of the balance-sheet total. Only one third of Finnish-owned companies are in the same situation.
The tax audits of Estonian-owned companies often lead to consideration of a crime report
More than seven percent of Estonian-owned companies have been tax audited. Of the tax audits made on Estonian-owned companies, approximately one third have led to consideration of a crime report
Finnish sharing economy companies are small but perform their public obligations well
Close to thirty domestic sharing economy companies operate in Finland at the moment. Their economic significance is relatively small so far. A poor economic situation poses a risk to sharing economy companies.
Income from the sharing economy is taxable
Natural persons using the sharing economy platform are obliged to pay income tax on their income. The treatment of the sharing economy in taxation does not differ from the tax treatment of traditional operating practices. The income received by a natural person is either earned income or capital income. Expenses incurred from the generation of income can be deducted in taxation.
Information on complying with statutory obligations is available, for example, at the jakamistalousinfo.fi website.
Tax authority access to information from sharing economy platforms must be ensured
The owner of a sharing economy platform is obliged to declare the income earned from platform activities. Platform owners are not, however, currently required to declare income from the taxable activities of users of the platform if cash payments are not transferred via the platform.
Legislation needs to be improved to ensure that the Finnish Tax Administration has access to information on business activities conducted by means of platforms. Legislation should be improved in such a way that operators would be obliged to provide more extensive information on platform users and their activities.
Companies with foreign responsible persons have more irregularities than Finnish-owned companies
Foreign-owned companies registered in the Finnish Trade Register have tax-related reporting and payment irregularities far more frequently than those managed by Finnish persons.
Companies managed by foreign nationals more commonly fail to pay their taxes
One third of foreign-owned companies have tax debts, and the average amount of the tax debt is twice as much as that of Finnish companies. The share of companies managed by foreigners that are taxed based on an estimation is 2.5 times that of Finnish companies, and the share of companies with tax debt is 1.5 that of Finnish companies.
Irregularities are particularly common in companies managed by Estonian nationals
Companies managed by Estonian nationals represent a fifth of foreign-owned companies. However, up to one third of companies with tax debt have Estonian ownership. Over 90 percent of the tax debt of these companies belong to companies that have already gone out of business.
Foreign-owned companies are short-lived
Companies with foreign ownership stand in clear contrast to those managed by Finnish persons in terms of their short lifecycle. The risk of termination of their business operations is also much higher than among Finnish companies. The country of origin of the responsible persons has an effect on the companies’ lifecycle; for example, companies with Swedish ownership have a longer average lifespan than those owned by Estonians.
These are some of the facts that emerge from the reports conducted by the Grey Economy Information Unit.
Online sales of electronic cigarette products declined even before the ban on distance sales
Online sales of electronic cigarette and tobacco products increased clearly in 2013–2015. In 2016, online sales of electronic cigarette products began to decline.
The ban on distance sales of electronic cigarettes and nicotine-containing liquids came into effect in 2017, after which private individuals have not been allowed to receive electronic cigarettes or nicotine-containing liquids purchased from online stores by post, as goods transportation or via other similar means from outside Finland. However, monthly sales had already fallen by some EUR 500,000 during 2016.
The Finnish Tax Administration’s Grey Economy Information Unit studied the development of online sales of electronic cigarette and tobacco products in 2013–2016. The share of electronic cigarettes of all online sales of tobacco products was 90 percent. This means that Finnish consumers spent more than one million euros per month on electronic cigarette products.
Online sales of electronic cigarette and tobacco products to Finland. Monthly sales in euros in 2013–2016. Source: Finnish Tax Administration 2/2018
Ordering traditional tobacco products from online stores has already prohibited before the review period, but their purchases from online stores amounted to EUR 1.5 million. The total annual value of online sales was calculated as EUR 18 million.
Distance sales concentrated in Estonia and Spain
Nicotine-containing liquids for electronic cigarettes could previously be ordered from online stores in the EU by post to Finland. The legality of ordering nicotine-containing liquids to Finland from the European Economic Area was determined by the nicotine content of the liquid and whether the customer had a prescription for the product.
Total sales of electronic cigarette and tobacco products from Estonia, Spain and the UK amounted to 60 percent of total online sales to Finland in 2016. The share of these sales amounted to approximately EUR 6.5 million. Other major online store locations were Latvia, Luxembourg and Germany. The ten biggest online stores represented 70 percent of the total sales from all countries in 2013–2016.
The average sales transaction was relatively small
The development of sales transactions and the number of customers followed the development of online sales in euros up to 2015. In that year, this translated to a total of 150,000 sales transactions and 30,000 customers. The average value of a Finnish customer’s purchase transaction for all electronic cigarette and tobacco products was EUR 50. The average value of traditional tobacco product purchases was EUR 150.
How can consumers do the right thing?
Consumers can do the right thing by buying electronic cigarette products from retail stores or specialty stores in Finland, as, for the first time, the Tobacco Act now allows sales of nicotine-containing liquids in Finland. Both nicotine-containing and nicotine-free electronic cigarette liquids were included in the scope of tobacco taxation from the beginning of 2017. The Act specifies a tax of EUR 0.30 per millilitre for electronic cigarette liquids. With the new Act, sales of electronic cigarette products will be the same as other tobacco products, i.e. electronic cigarette products must be kept hidden in the store like other tobacco products (display ban). Ordering electronic cigarette products from online stores, on the other hand, is currently illegal, similarly to snus or tobacco.
Companies’ tax debt information available in a tax debt register free of charge
The tax debt register helps both ordinary consumers and entrepreneurs to avoid purchases from companies with tax debt. The tax debt register refers to information, open for all, on any tax debts of companies and deficiencies in reporting of self-assessed taxes. Tax debt information is available online at ytj.fi → yrityshaku.
Tax debt register browsed more than a million times each year
Based on the number of users, the tax debt register is necessary. The usage rate has totalled 1.4 to 2.2 million searches per year. The tax debt register was introduced in December 2014.
The number of searches performed in the tax debt register in 2015–2017
High user satisfaction but more information is required
Based on a user survey, the users of the tax debt register have a positive attitude towards the register and find it quick and easy to use. The register is considered reliable and useful. However, just a fraction of users of the tax debt register satisfy themselves with only the information provided by the register. Most users simultaneously utilise the commercial tilaajavastuu.fi service, which provides details on compliance with contractors’ obligations.
Tax debt register users would like all information pursuant to the Act on the Contractor’s Obligations and Liability when Work is Contracted Out to be available in the same place, free of charge. Many find this a key development area.
Finnish Tax Administration aims to expand the information content of the tax debt register
The Finnish Tax Administration proposes that the information contents of the public tax debt register be expanded to become considerably more comprehensive than now. The change would make compliance with the Act on the Contractor’s Obligations and Liability when Work is Contracted Out easier and enhance the efficiency of the Finnish Tax Administration's operations. However, expanding the information content would require legislative amendments.
The impact survey of the tax debt register was conducted by the Finnish Tax Administration’s Grey Economy Information Unit.
The food sector is vulnerable to fraudulent activities: the risk of being caught is small, the profits are often high and the sanctions for any crimes tend to be low. The common motivator in food-related crimes is financial gain. In most cases, such crimes are financial offences, and often also hidden crimes.
Prevention and investigation of food frauds is challenging. In Finland, the focus of food supervision authorities is on food safety, and potential suspected crimes have not always been brought under pre-trial investigation.
Kirsi Hannula from Evira points out that, in recent years, cooperation between authorities has been stepped up, which has resulted in more efficient initiation of criminal proceedings in police departments all over Finland.
Through their unions, representatives of the food industry have expressed their willingness to participate in the prevention of food fraud. In spite of the increased cooperation and support by the sector, investing in the prevention of crime in the food chain will be a challenge for the whole chain of authorities in the years to come.
Shortcomings in fulfilling obligations among food industry operators
A survey on how food companies fulfil their obligations reveals, for example, that almost every third operator has tax liabilities, and about every fifth food company has negative equity.
The survey showed that companies with shortcomings or serious shortcomings in complying with food laws had, relatively speaking, more irregularities in fulfilling their reporting and payment obligations related to taxation than other companies.
Increased powers for food control
Evira and the Grey Economy Information Unit have together examined the needs for amending the Food Act. Their report proposes introducing in the law provisions on the reliability of food industry operators, expanding the data access rights of authorities and the right of authorities to disclose information to other authorities on their own initiative.
The reliability of the operator, which, in this context, would refer to, for example, carrying out the statutory obligations, should serve as the precondition for operating in the food sector. The reliability requirement would promote honest competition within the food industry and improve the operating conditions of companies that follow the rules. The authorities’ access to information should also be enhanced to ensure that authorities could verify the reliability of companies without increasing the administrative burden of entrepreneurs.
A comprehensive reform of the Food Act is currently pending in the Ministry of Agriculture and Forestry, and it would be appropriate to implement the reforms proposed in the survey in connection with the comprehensive reform.
Criminal record increases risk of grey economy activities
A person’s criminal record is important to assessing the risk of involvement in the grey economy. There is a connection between the criminal record of a responsible person and their management of business obligations. However, strict limitations are in place on the usability of criminal intelligence in official supervision.
More debt and irregularities in the case of persons with a criminal record
In general, companies owned by persons with a criminal record have more tax liabilities than other companies. According to the survey, high tax liabilities in excess of EUR 30,000 were clearly more common than normal and the share of non-managed tax liabilities was more than three times that of other companies. The share of companies taxed based on an estimation was five times that of other companies. Research proves that a company's tax liability predicts the risk of participation in the grey economy.
Companies owned by persons with a criminal record underwent tax audits more frequently than other companies, and more than half of the audits were grey economy audits. The companies and responsible persons were more frequently subject to enforcement measures and such companies had undergone the various stages of bankruptcy three times more frequently than other companies.
Companies managed by responsible persons with a criminal background often have a short lifecycle. Furthermore, these companies are less frequently entered in the prepayment or VAT register than other companies. In addition, on the basis of the Finnish Tax Administration’s register data, they are often inactive.
Non-financial criminal records also raise the risk of irregularities
The type of crime previously committed – whether it be financial or non-financial in nature – has no notable effect on the risk of cessation of business. A record of financial irregularities and deficiencies in registrations, notifications and payments was more common than usual among persons guilty of financial or other offences.
Criminal record information would be of considerable help in the supervision of business
Information on the criminal record of a responsible person running a company would be of considerable importance to official supervision. However, effective use of criminal record information has not been possible. The current legislation does not allow the Finnish Tax Administration to use criminal records for purposes such as risk management. The permit and registration authorities should be able to take account of the criminal records of responsible persons as part of risk identification and when assessing the preconditions for running a business.
The survey reveals clear shortcomings in the conduct of businesspersons who have committed offences, as well as risks of participation in the grey economy. The identification of financial irregularities, such as a criminal record and tax liabilities, as well as other information on the financial position of a company, would be integral to taking preventative action against the grey economy.
The findings of the survey support the recurring themes of key projects in the National Strategy for Tackling the Grey Economy and Economic Crime for 2016–2020, on improving the exchange of information between authorities and promoting fair competition.
This article is based on a report by the Grey Economy Information Unit 21/2018.
Working Group of Finnish Tax Administration proposes the introduction of fiscal online point-of-sale systems in Finland. These systems send data of sales transactions to the Tax Administration. In Finland, the systems would be introduced in some 170,000 companies engaged in consumer sales.
Concealment of income is a commonly used method in the shadow economy
Concealment of income and cash register manipulation create a tax gap. In sectors dominated by the use of cash, the simplest way to avoid declaring all sales is to alter the sales data recorded in accounts. There is currently no legislation in Finland defining the minimum requirements, uses, or features of point-of-sale systems or equipment. A fiscal point-of-sale system would ensure unchanged sales data.
Higher tax revenues can be expected
The introduction of a fiscal point-of-sale system can be expected to increase the annual growth in tax revenues by approximately EUR 120–140 million. Countries that have introduced these systems have reported an increase in tax revenues. In Sweden, tax revenues grew by around 5% in various sectors. According to OECD studies, competitive neutrality between businesses has also improved.
The start-up expenses would total around EUR 122 million for companies and EUR 24 million for the Tax Administration. There would be no marked change in annual operating costs for businesses over the current level, and the increase for the Tax Administration would total approximately EUR 4–6 million.
Finland not up to speed with international development
At least 22 OECD and IOTA countries are already using various types of fiscal point-of-sale systems. Of these, 15 are EU countries. The various countries have different systems. The online system is electronically connected to a party outside the cash register system, e.g. the tax administration.
Tax control of companies' sales data
According to the proposal, the Tax Administration would receive information on companies’ sales through the point-of-sale systems. Customer information would not be collected. The data to be collected would, in substance, consist of data defined by legislation governing the obligation to offer a receipt. Aggregate sales data would also be collected.
A buffered online system is proposed as a solution for implementing fiscal point-of-sale systems. Buffering means that an enterprise's sales transactions are stored in a buffer in potential network error situations and transferred to the Tax Administration when the network is restored.
The solution would be available for controlling business transactions in point-of-sale systems. This would be a multifunctional technological solution, which could also be applied to controlling the platform economy.
The reform takes account of future development
When implemented, the fiscal point-of-sale systems would prevent the shadow economy in consumer trade. The systems would significantly promote the combating of the shadow economy and the development of electronic payments. The implementation would also provide a basis for the development of digitalisation in companies’ financial administration.
The surveys are based on the Government's strategy for tackling the shadow economy and economic crime in 2016–2020.
Preliminary studies on the suitability and impacts of fiscal point-of-sale systems have been completed, read more (in finnish only):
- Yhteenveto selvityksistä (PDF 753 kB)
- Vaikutukset yrityksiin, verotuloihin ja lainsäädäntöön (PDF 2,46 MB)
- Kansainvälinen käytäntö (PDF 2,98 MB)
- Valvonta (PDF 800 kB)
- Tekninen toteutus ja sovellutukset (PDF 1,10 MB)
Support for online point-of-sale systems
In spring 2016, the Government issued a strategy for tackling the shadow economy and economic crime and assigned the Finnish Tax Administration to investigate the suitability of fiscal point-of-sale systems for cash-dominated sectors. The Finnish Tax Administration's working group recommended the introduction of fiscal point-of-sale systems in Finland and circulated its report for comments.
More than 50 interest groups and organisations, for example the public administration, public authorities, labour market organisations and device and system suppliers were requested to comment on the preliminary report. Of the 33 bodies that provided a comment, 24 were in favour of the reform, 7 opposed it and 2 did not give an opinion.
The bodies that issued a statement listed the reform’s positive impacts as more effect in combatting the shadow economy and economic crime, higher tax revenues without raising tax rates, improved competition neutrality and furthering the financial administration's digitalisation. Further positive aspects included a lighter administrative burden on businesses and the possibility to respond to the challenges involved in the platform economy. The low-cost system would also be suitable for micro-enterprises.
Some of the bodies that issued a statement listed negative comments, including that the reform would have no impact on the concealment of income and the non-registration of sales in the cash register, that the costs would affect entrepreneurs who trade honestly, that the administrative burden would rise and that the shadow economy would grow.
The estimated growth in tax revenues would be approximately EUR 120–140 million and, if implemented, the reform would create the opportunity to digitalise financial administration processes. The business world has estimated that the benefits and cost savings achieved would be EUR 800 million per year. The total benefit of the implementation of the reform would, in the best-case scenario, therefore total one billion euros per year.
Summary of statements in Finnish (PDF 1010 kB)
Janne Marttinen, Director, tel.: +358 29 512 6066
Marko Niemelä, Assistant Director, tel.: +358 29 512 6070
From an employee into a self-employed individual – is the tax risk dispersed to small companies?
Finnish companies are small
Small entrepreneurs have been in focus in many of the Grey Economy Information Unit’s reports. Nearly half of the limited liablity companies studied were owned and managed by one person. In every second enterprise of a self-employed individual and every third business operating in company form, net sales were below €15,000.
Small entrepreneurs’ impact on tax revenue
Small entrepreneurs’ low income also affects tax revenue. When business operations are divided into smaller entities, the responsibility for the obligations is also divided. The risks of neglecting the obligations may grow as the number of operators increases.
Shadow economy risks are also present in small companies
Some small companies are established to operate in sectors – such as construction – where the risks of shadow economy are high. Quick changes in the business base may be a sign of a healthy development in which resources are being allcoated to more productive growth industries. It may also indicate that one-off companies are used to evade taxes and other public charges.
During the past ten years, the Tax Administration has filed nearly 600 crime reports on companies owned by small-income entrepreneurs. Most of these crime reports have dealt with tax frauds, particularly in the aggravated form.
The operating environment of small companies is described in the following reports:
A company’s tax debt increases the likelihood of the manager’s personal tax debt
Companies with outstanding employment pension contributions often also have irregularities in the management of their other statutory obligations. Typically they also owe money to a large number of creditors.
Most debtor companies are small enterprises. The risk industries for shadow economy – construction, and the accommodation and restaurant sector – rose to the surface in the analysis of the debtor companies’ lines of business.
The pension contribution debt was studied in the Grey Economy Information Unit. The financial standing and other business contacts of the senior managers of the companies with outstanding employment pension contributions were also investigated.
Suspected crimes detected during tax audits were screened in Raksa
The majority of the people sentenced had utilised more than one company. Other typical features of these crimes included the use of straw men and companies with a short lifecycle, fake sales receipts and falsified invoices. The proceeds of crime were often used to pay wages “under the table.”
In 2008–2012, the Tax Administration implemented a tax control project (the Raksa project) targeting the construction sector. Crime reports made on the basis of tax audits and sentences passed and people sentenced on account of them were studied more closely. In addition, the amounts of damages and the collection of damages were investigated.