Annual report – Finnish Tax Administration's Year 2018

Looking back at 2018 – Director General Markku Heikura discusses the highlights of 2018 (Youtube).

Year under review – Changes in the operating environment pose challenges

We honed our existing strategy to steer our work in the desired direction. We improved our efficiency by increasing the degree of automation in taxation, widening the range of data we obtain from our stakeholders and collect electronically, introducing new tools and providing new e-services.

The net tax revenue was €68.6 billion, including excise duties and car tax. Productivity and economic efficiency improved. This is due to an increase in the number of taxpayers, as well as a decrease in full-time equivalent employees and operating expenses, in comparison to the previous year.

The Finnish Tax Administration overhauled its strategy in 2018. The strategy work sought to address changes in the structures of the economy, in the labour market and in the operating models of companies, and the challenges and risks they pose to safeguarding tax revenue. In addition to changes in the economy, the need to overhaul the strategy was influenced by internal factors such as retirement among our personnel and the need for new kinds of expertise.

To achieve our objectives, we need to manage different kinds of phenomena, employ properly targeted guidance and control, ensure operational efficiency and have a broad-ranging influence on the entire operating environment. Over the next few years, we will focus on analytics and artificial intelligence, automation, international cooperation and interfaces as well as obtaining and utilising information. Our expertise and operating model must enable us to implement rapid changes if necessary. We are pioneers in the digital economy.

During the spring, we planned the 2019–2023 period. A key change in our business planning is that our planning timeframe is becoming longer, with a greater emphasis on the early detection of development needs in the years ahead.

The most important tasks in the planning period are deploying the taxation system modernisation programme (Valmis), safeguarding basic operations, launching the national Incomes Register, and getting to grips with the car, excise and import VAT tasks that were transferred from Finnish Customs to the Tax Administration. The scope and significance of tasks in international information exchange are also growing constantly.

The reform of business planning builds on the strategy work that started in spring 2017 and which yielded a strategic goal plan.

The platform economy poses challenges to tax revenue

When a large share of business operations moves onto digital platforms, it becomes more difficult to follow the movements of information and money for taxation purposes.

​From the perspective of implementing taxation, it is vital to stay on top of income and information flows, as effective taxation is based on comprehensive access to information. The platform economy survey we commissioned in June 2018 indicated that 76 per cent of citizens who sell goods or services on digital platforms consider it important to handle their tax matters correctly. However, only 44 per cent of the respondents thought it was likely that private individuals and other service providers on digital platforms manage their tax obligations correctly – and as many as 23 per cent thought this was unlikely.

At the start of 2018, we adopted a model where development operations were joined with IT services, and a procedure for quicker processing of development proposals was taken into use. The goal is to shorten the duration of development projects and to improve aptness with regard to operational objectives.

In the reorganisation of the Corporate Taxation Unit, regional corporate tax offices and tax auditing units were merged to form new Corporate Tax Offices at the beginning of 2018. Now, five regional Corporate Tax Offices and the Large Taxpayers’ Office are responsible for the taxation and services of corporate taxpayers. The overhaul was intended not only to streamline the organisational structure, but also to provide better opportunities to develop the management of customer relationships and tax risks as well as the flexible use of resources.

From the start of the year, all customer-initiated service was concentrated in a single unit, as the Taxpayer Services Unit was established. The change strives for high-quality and uniform services for taxpayers, and effective production of these services.

The Finnish Tax Administration and the Tanzania Revenue Authority (TRA) launched a development cooperation project in autumn 2018. The project aims to help TRA develop its operations in tax control, internal auditing, communications and customer service.

The project will run until 2021. It is an IKI development cooperation project financed by the Ministry for Foreign Affairs of Finland. Experts from the Finnish Tax Administration participate in the project by, for instance, training TRA officers in Dar es Salaam, Tanzania.

The technical assistance project for Tanzania is part of the Finnish Taxation and Development action programme based on the Addis Tax Initiative. In the Addis Tax Initiative, Finland is committed to doubling its support to helping developing countries bolster their taxation capabilities by 2020. 

MyTax ranked in the top five of the Suunnannäyttäjät competition in 2018. The 2018 Suunnannäyttäjät competition sought public administration projects and developer teams whose achievements help citizens in their day-to-day lives. The winner of the competition was Terveyskylä.fi.

Thirty projects participated in the competition. The public voted for the five finalists. 

Following the tax system reform, information has been transferred from old IT systems that are due to be phased out to the National Archives for permanent storage.

The transfer project is a large-scale effort in the context of the public administration. The amount of information transferred from the Tax Administration for permanent storage is the greatest amount transferred to the National Archives from any organisation to date. A substantial amount of time is required for the continuous transfer of all the electronic materials. After their confidentiality period ends, the materials are available to future researchers.

The income tax documents of individual taxpayers have been digitised directly as from the end of October 2018. This has ushered in a new way of working. All documents submitted by individual taxpayers – and the new forms for their income taxation that are published on tax.fi – now go directly to digitisation.

Earlier, much work was required before documents intended for mass storage were forwarded to digitisation: they were removed from their envelopes, the information was saved, paperclips removed, and the correct insert pages added. The peak period when it comes toforms is in spring 2019 when tax returns are due – it is good to use the MyTax service at that time. 

Our service – We are increasing the level of automation for tax assessment

Our goal is to increase electronic data collection and the amount of data we receive from stakeholders.  We have adopted new tools and produced new e-services.

The use of our e-services increased, whereas the number of visits to tax offices decreased slightly from last year.

MyTax enables taxpayers to view and take care of the majority of their tax matters. The service was opened to individual taxpayers in November 2018. MyTax replaces the Tax Card Online and Tax Return on the Web e-services previously provided for individual taxpayers by the Finnish Tax Administration. In MyTax, taxpayers can also view payment information relating to tax refunds and back taxes, pay taxes, manage their company’s taxes and submit an account number for tax refunds.

Limited liability companies and other corporations have already been using MyTax for a few years.

E-services provide many benefits for taxpayers. The service is available around the clock, there are no queues, papers are never misplaced and there is no need to wait for the postal service to deliver documents.

In addition, e-services generate savings for society. For example, going to a local tax office to get a paper tax card costs eight times as much as making a tax card online.

The implementation of the Incomes Register system progressed in 2018 and the first deployment was carried out on 1 January 2019. The Incomes Register is the current government’s spearhead project in the digitalisation of public services. The Finnish Tax Administration is responsible for its implementation.

The Incomes Register was built in extensive cooperation between different authorities, software companies, interest groups and other actors. The Incomes Register is a national database that includes extensive salary, pension and benefits income information. The Incomes Register is a government service for the digital era, in which information flows automatically from companies and citizens to the authorities in real time.

The maintenance and development of the Incomes Register is a new task for the Finnish Tax Administration. The Incomes Register Unit was established for these activities in early 2018. The Incomes Register will be expanded to cover information on benefits and pensions in 2020.

According to the tax policies laid out in Prime Minister Juha Sipilä’s Government Programme, the Veto programme was intended to transfer excise, car and import VAT taxation from Finnish Customs to the Tax Administration in a controlled manner. This transfer aims to achieve cost and resource benefits and reduce the administrative burden of companies.

In 2015, the Ministry of Finance set the timeframe for the project as 4 September 2015 to 28 February 2018.

The project has been completed as planned, and the Finnish Tax Administration now handles excise, car and import VAT taxation.

Overhaul of procedures continues

A project was launched in 2018 to harmonise excise and car taxation procedures as far as possible with the other taxation procedures of the Tax Administration. Harmonisation seeks to step up e-services, reduce the administrative burden of taxpayers and facilitate the work of tax officers.

From the taxpayer perspective, the harmonisation of procedures shows as the future transfer of e-services for excise and car taxes to MyTax. This reform builds on the Veto project, in which excise and car taxation have been transferred from Finnish Customs to the Tax Administration.

The aim is that the excise and car tax reform will come into force in 2021.

We regularly monitor customer satisfaction. In 2018, customer satisfaction with the Finnish Tax Administration’s services was at a good level: 85 per cent of customers are satisfied with our telephone service.

As our strengths, customers singled out our personable and engaging way of interacting with customers and our authentic interest and desire to work together to resolve the customer’s problem. Our objective is to ensure that customers can deal with their tax matters and are happy to pay their taxes.

This year, 1.45 million Finnish taxpayers added information to their pre-completed tax returns. More than 60 per cent of these additions were made online. Almost four million recipients of tax returns only had to check the information and did not have to make any changes.

The number of tax returns filed online has grown tremendously during the past 10 years. In 2007, about 145,000 taxpayers added information to their tax returns online. This year, the figure was already almost 900,000. Those who e-file their tax returns most actively are aged 25–40, of whom over 80% make the additions online.

Last year, we held 24 webinars on current issues for taxpayers. The most popular webinar had several thousand participants. Webinars are organised for different target groups, such as accounting firms, employers, new companies, associations, foundations and international actors. During the webinar, participants can ask questions of the Tax Administration’s experts via chat. All webinar recordings are released on the Tax Administration’s YouTube channel and on Tax.fi.

In 2018, the Tax Administration’s social media audience grew by more than 18,000 new followers. This represented growth of 70%. The channel that saw the greatest growth was our reconceptualised Instagram, which gained almost 6,000 (+390%) new followers. The Tax Administration almost doubled its followers on LinkedIn.

In 2018, the total earned media value of the Tax Administration’s Facebook, Twitter, LinkedIn and Instagram channels amounted to €373,500 (+10%). LinkedIn and Instagram saw the greatest growth. However, earned media value from Facebook began to decline.

The Tax Administration launched several new channels: the Incomes Register’s Facebook and Twitter accounts as well as the MeKorhoset Facebook page, produced in cooperation with the Finnish Social Insurance Institution (KELA). The Tax Administration stopped updating its Snapchat.

All in all, 2,100 pieces of content were published in different channels.  The Tax Administration released 174 new videos on YouTube. These videos were watched more than half a million times. The instruction video on tax cards online drew the greatest number of viewers.

The year’s best social media content were the tax-related ASMR whispering videos (Facebook)the shredded secondary income card (Instagram) inspired by the art of Banksy and the customer service singles survey (Twitter). Many MyTax service-related contents also performed very well.

Control – Tax control reduces the tax gap

The Tax Administration worked to combat the shadow economy, teaming up with other authorities and cities.

Finland has one of the lowest VAT gaps in Europe. In the past few years it has been around 4–7% of the amount collectable under VAT legislation. Approximately 20% of the VAT gap is due to outstanding taxes. The VAT gap has been assessed both by the European Commission and by using the IMF’s RA-GAP methodology.

Tax auditing is intended to identify and tackle phenomena that have adverse impacts on the tax system as well as to ensure efficient control. Tax audits primarily focus on corporate taxpayers, but some audits of individual taxpayers are also performed.

Tax audits and other control measures were targeted at identified tax risks in different tax types. Tax audits focusing on business taxes, VAT and prepayments have been complemented with tax audits of excise duties and car taxes. In 2018, a total of €185 million in taxes were levied based on tax audits. Tax audits have increased the use of lighter means of control and guidance.

Tax audits have made proactive use of international information exchange. The amount of case-specific information exchanged grew in 2018 compared with earlier years. Finnish tax inspectors have been present in other EU countries to actively solve cross-border problems. In 2018, Finland participated in 29 such visits. In addition, tax auditors have reciprocally collected and sent comparative information to the Tax Administrations of other countries that could have a tax effect in that country.

In 2018, the Large Taxpayers’ Office defined its target state: all taxpayers act correctly and all tax questions are resolved expertly and pre-emptively. The Large Taxpayers’ Office has emphasised lighter methods of guidance and control. The aim is to shift the focus even more firmly onto pre-emptive activities instead of retroactive tax control. Detected tax risks have primarily been addressed by means of pre-emptive discussions or control visits. The Large Taxpayers’ Office employs retroactive tax control – that is tax audits – in situations where other methods are not effective enough.

The Office has continued to develop the pre-emptive discussion method and supports the adoption of the method throughout the entire Corporate Taxation Unit. In addition, the pre-emptive discussion method has been expanded in 2018 to cover international tax questions. Cross-border dialogue is suitable for a situation in which the taxpayer requires statements from the tax administrations of two or more countries. The promotion of cross-border dialogue will continue in the years ahead at both EU and OECD levels.

In 2018, the Grey Economy Information Unit drafted dozens of phenomena analyses in order to facilitate the planning of monitoring, as well as more than 300,000 obligation compliance reports to support the authorities in the performance of their tasks. In addition, the use of the obligation compliance report service expanded to new areas, such as the granting and monitoring of Trafi’s (now Traficom) taxi permits and the Regional State Administrative Agency’s business permits for real-estate agents and debt collection service operators, the registration and monitoring of travel service combination providers by the Competition and Consumer Authority, and supporting the tasks of the Financial Supervisory Authority.

The Grey Economy Information Unit serves as a nationwide coordinator of the joint shadow economy and economic crime snapshots published by the authorities. More than 20 authorities participate in the editorial committee work. The revamped website of the snapshot function went live in spring 2018 at https://www.vero.fi/en/grey-economy-crime/. The site provides an overview of the shadow economy and financial crime phenomena, prevention and scope, and instructions on how to act.

Efforts to combat the shadow economy focus on preventing serious financial crime. Cooperation with other authorities is broad-ranging and diverse. In about 20% of all tax audited cases, a police report was considered; this figure was 65% in cases audited by shadow economy specialists. Slightly less than 36% of the total tax audit working time was spent on shadow economy audits. The majority of these cases were handled by shadow economy specialists. About 100 audits were completed in cooperation with the police in 2018.

One typical means of tax evasion in the shadow economy is the use of falsified receipts. A total of about 5,300 falsified receipts were found during tax audits in 2018, with a value of approximately €30 million. Fraudsters use falsified receipts to gain unjustified tax benefits or refunds. Enhanced joint control of processes in combating the shadow economy has taken a bite out of fraud involving VAT refunds. The number of illicit employees detected during tax audits was 1,100. However, the majority remain undetected. Unreported pay amounted to around €42 million. Use of foreign labour has increased. The number of detected cases of identity abuse has also increased, both among companies and individuals. Identity abuse is a tool for committing different kinds of fraud, including tax fraud.

Preventative work with cities has continued to identify shadow economy phenomena and corruption in public procurements. The Finnish Competition and Consumer Authority is involved in this cooperation. The Tax Administration cooperated with the Association of Finnish Technical Traders in order to identify fraudsters in the steel business. Efforts to combat the shadow economy also uncover other abuses. Such cases are reported to other authorities for their supervision. Combating the shadow economy involves international cooperation, especially with the Nordic countries and Estonia, but also at EU and OECD level.

Personell – Decrease in routine tasks changes the nature of our work

2018 was the year of organisational changes and the biggest launch in the overhaul of the tax assessment system. The changes affected a big part of the staff. Despite considerable changes, job satisfaction remained at a good level when compared to the previous year. There was a big increase in telecommuting. Almost two thirds of Tax Administration employees sometimes work from home.

We have promoted the spearhead projects set out in the Government Programme with regard to leadership and experimental culture by improving leadership, increasing trust and interaction, and by making use of trials and agile methods for increasing effectivity.

As our operations evolved, we cared for and enhanced our staff’s competence in many ways.

We prepared for changes regarding robotics, automation and work by investing in strategic HR planning, which serves as the basis for the development and expansion of skills and expertise.

We looked after the competence of our employees in many ways, as the Valmis program for overhauling the taxation system evolved our operations. More and more, we are learning on the job and through interaction with others.  We developed methods of on-the-job learning and tools for eliciting participation, and promoted opportunities for learning in networks.

Almost 4,000 Tax Administration employees evaluated the quality of their working life. The response rate to the VMBaro government job satisfaction survey was 78 per cent.

In terms of the average figures for the entire Tax Administration, the results are almost identical with those from 2017. The job satisfaction index rose from 3.62 to 3.63.

Job satisfaction lays a good foundation for developing working life.  

In the sphere of financial responsibility, we have improved productivity and cost-effectiveness, reduced the taxpayers’ administrative burden and improved planning and monitoring systems.

As part of our social responsibility, we treat taxpayers and staff fairly and equally, and improve well-being at work and health management procedures.

With regard to environmental responsibility, we continued to implement the Green Office programme. The aim of this WWF programme is to help organisations to reduce their environmental load and to slow down climate change. The environmental load caused by travel increased somewhat, due to an increase in air and train travel. Paper use remained at the level of the previous year. However, the number of letters mailed decreased by 6 million, which equates to 28.4%.  The kilogram amount of printed forms also saw a decrease of approximately 100,00 kg.

The kWh figures for electricity and heat consumption remained almost unchanged, but the carbon dioxide emissions increased slightly.