Incomes Register's effect on municipalities' tax gap smaller than thought

7/1/2020

The deployment of the Incomes Register in 2019 brought about many changes. Employers and accounting firms started to report income data in a new way, and some payroll software had trouble keeping up with the new procedure.

Last year, municipalities and other tax recipients received less in tax revenue than anticipated.

The Incomes Register was thought to be one of the reasons why the stream of transfers was slowing down. After all, the Finnish Tax Administration paid the withholdings it had collected to the tax recipients based on Incomes Register data. The Tax Administration is one of the Incomes Register's data users.

However, for the Incomes Register, the situation had already been rectified by the end of 2019 when the necessary changes in payroll software had been established. The majority of income data is reported to the Incomes Register automatically, directly from payroll systems.

A far greater reason behind the tax gap than any initial problems with Incomes Register reporting turned out to be the change in the tax withholding procedure, also deployed in the beginning of 2019. The annual income ceiling for tax withholdings was introduced, which changed the schedule for tax revenue.

Our society receives up-to-date information from the Incomes Register

From the Incomes Register, data users can get more precise information on paid income than what had previously been available. For example, official decisions can now be based on real-time income data and decisions will be easier to anticipate than before.

Citizens can also check what income data their employers have reported for them in the Incomes Register. If necessary, employers correct any errors and deficiencies in reports.

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