Taxman sets police on Finns coming clean on undeclared overseas income
Finns alarmed by cracks in the previously iron-clad Swiss banking secrecy have come forward to volunteer information about undeclared overseas income to Finnish tax authorities. They were hoping for immunity from fines or criminal sanctions but dozens now face police investigations.
The Finnish Tax Administration has requested police investigations into 28 cases of tax fraud involving individuals who have voluntarily come forward to declare untaxed assets held overseas in foreign banks in places such as Switzerland.
The cases are linked to previously-proposed “active repentance” legislation tabled by Juha Sipilä’s government roughly one year ago. However the draft bill was one of the ill-fated proposals hastily withdrawn by the greenhorn administration in the face of fierce public criticism.
The taxman called for the police probes into cases of suspected and aggravated tax fraud after processing up to hundreds of tax cases involving individuals voluntarily declaring their untaxed income in the hope of avoiding criminal sanctions.
Some of the cases date back to the beginning of 2015, suggesting that tax officials have taken nearly two years to decide on placing them in the hands of police.
According to information obtained by Yle, the unpaid taxes in question amount to tens of thousands of euros per suspect, representing investment income in the millions.
Usually individuals found guilty of committing tax fraud face fines or a maximum of two years in prison. The penalty in cases of aggravated tax fraud ranges from a minimum of four months in prison to a maximum sentence of four years.
“Active repentance” legislation canned
In autumn 2015 then-Finance Minister Alexander Stubb tabled the government’s so-called “active repentance” draft legislation in Parliament. The purpose of the legislation was to encourage persons avoiding paying taxes in Finland to come forward and report their undeclared income in exchange for immunity from sanctions.
Tax lawyers and consultants had lobbied heavily for the legislation, telling politicians and tax authorities that many Finns who had considerable funds stashed abroad wanted to return their wealth to Finland and pay the related taxes. Consultants stressed that this would only happen of government could provide assurances that no criminal sanctions would follow.
However critics argued that persons engaged in tax evasion should not be able to pay their way to avoiding criminal sanctions, as the proposed law seemed to suggest.
Another issue was that the draft bill would not only make it possible to cover up investment income generated abroad, it would also facilitate covering up losses. In practice this would mean that owning up to undeclared foreign income would have been rewarded with criminal immunity as well as tax refunds.
Crackdown on Swiss banking secrecy
Behind the apparent attack of conscience on the part of tax avoiders was a crack in the centuries-old tradition of iron-clad secrecy among Swiss banks. The fight against terrorism had generated intense international pressure on the banks to open up their customers’ accounts to scrutiny as different countries called for information about cash flows involving their citizens and corporations.
This put the squeeze on Finns who had used overseas banks to avoid paying taxes at home, as banks began to track and clean up dirty money from their books. Some of the funds later declared to Finnish tax authorities had been in hiding in Switzerland for decades.