Finnish Tax Administration Annual Report 2015

FINNISH TAX ADMINISTRATION ANNUAL REPORT 2015

FINNISH TAX ADMINISTRATION ANNUAL REPORT 2015

“We have great people working at the Tax Administration and you always get help from colleagues. It is very good that people want to renew themselves and do things ever better. I also like the fact that the employer is positive to reconciling work and leisure. Great place to work!”

Anna-Leena Tielinen, Educational Planner, Tax Collection Unit

Finnish Tax Administration’s publication 350ev16 May 2016

Graphic design: Markkinointitoimisto Kitchen Oy

Photographs: Nina Kaverinen

VISION 2025

TAX ADMINISTRATION IN BRIEF THE FINNISH TAX ADMINISTRATION 6 OUR EMPLOYEES 7 ENHANCED OPERATIONS THROUGH E-SERVICES 8 TAX REVENUE AND BREAKDOWN

BY TAX RECIPIENT 9 MESSAGE FROM THE DIRECTOR GENERAL 10

SKILFUL STAFF INVOLVED IN CHANGE TOMMI KÄMPE: HAPPY STAFF WORK WELL TOGETHER 13 INFO Good workplace atmosphere is a strength ESSI TEPPOLA: CREATING OPPORTUNITIES FOR ON-THE-JOB INSTRUCTORS 17 INFO Training as support for work SANNA SAVOLAINEN & LAURI TUOMARLA: DIFFERENT LOCATIONS, SAME ROUTINE 21 INFO New ways of working ANSSI IMMAISI: TALK TO EACH OTHER 25

RESULTS OF THE TAX YEAR 2015

TAX ADMINISTRATION OPERATIONS

NET REVENUE OF TAXES TOTALLED €55.1 BILLION 29

TAXATION UNITS 37

DEVELOPMENT OF TAX REVENUES 2015 30 BREAKDOWN OF NET REVENUE BY SOURCE

THE TAX ADMINISTRATION MANAGEMENT GROUP 39 31

EUR 55.1 BILLION IN PUBLIC SERVICES 32 UNPAID TAXES TOTAL EUR 4.4 BILLION 33 EFFICIENCY IN FISCAL ADMINISTRATION WORK 34

THE NET REVENUE OF TAXES

euro

55.1 billion

CORE PROCESSES SUPPORT THE CORE TASK 38

FINLAND’S VAT GAP IS SMALL 35 the VAT gap in European Union member states in 2013

NUMBER OF STAFF INCREASED ACCORDING TO PLAN 40 STAFF IS MORE EDUCATED 41 THE MINISTRY OF FINANCE GUIDES OUR OPERATIONS 42 STRATEGISKA PROJEKTEN 2015 43 LEGISLATIVE AMENDMENTS IN 2015 45 DEVELOPING OUR E-SERVICES 46 COMBATING THE GREY ECONOMY 48 ACTIVE INTERNATIONAL COOPERATION 49 TAX COMPLIANCE GIVES INCREASED REVENUE 50

THE FINNISH TAX ADMINISTRATION OUR EMPLOYEES ENHANCED OPERATIONS THROUGH E-SERVICES TAX REVENUE AND BREAKDOWN BY TAX RECIPIENT MESSAGE FROM THE DIRECTOR GENERAL

6

FINNISH TAX ADMINISTRATION 2015

Our goal is to collect the right amount of taxes at the right time to enable society to function.

OUR ORGANIZATION

DIRECTOR-GENERAL Executive and Legal Unit Internal Auditing Unit

To safeguard the revenue stream by providing proactive guidance and good service as well as through credible tax control.

Communications Unit

Our goal is to have customers handle tax-related transactions independently and in the correct manner.

Administrative Unit IT Services

In 2015 tax recipients received over EUR 55 billion in tax revenue.

INDIVIDUAL TAXATION UNIT

CORPORATION TAXATION UNIT

TAX COLLECTION UNIT

Grey Economy Information Unit

Central Tax Board

Tax Recipients’ Legal Services Unit

Board of Adjustment

STRATEGIC OBJECTIVES SUPPORT OUR MISSION Tax gap to shrink considerably

Watch the video

Taxpayers to meet their liabilities in full Smooth and effective processes Competent and motivated employees

VISION 2025

OUR VALUES

The Tax Administration’s reputation and results are among the best in the world.

Building trust.

Working together.

Embracing New Ways of Working.

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FINNISH TAX ADMINISTRATION 2015

STAFF

PERSON-YEARS

5,089 persons

GENDER DISTRIBUTION

75%

4,877

AGE DISTRIBUTION 15–24

45–54

25–34

over 54

35–44

3,561 people

70% outside the Helsinki capital region 1,528 people

30 %

in the Helsinki capital region

men

PEOPLE STAY AT THE TAX ADMINISTRATION FOR A LONG TIME Age, years

OUR EMPLOYEES ACROSS FINLAND

25%

women

SATISFIED EMPLOYEES

71%

The average age of retirement

64 6 years

months

The average age of retirement in central government 63 years 10 months

LEVEL OF EDUCATION Postgraduate 1%

23%

Master’s

of staff are happy with the employer’s reputation (VMBaro 2015)

17%

Bachelor’s or polytechnic

75 %

34%

Lowest tertiary

12%

Upper secondary

of Tax Administration employees would recommend the workplace to their friends (VMBaro 2015)

Basic education

5%

Not known

8%

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FINNISH TAX ADMINISTRATION 2015

INDICES OF PRODUCTIVITY AND COST-EFFICIENCY 2015–2015

TAX CARDS ORDERED VIA TAX CARD ONLINE

TAX.FI

150 140

+7.3% visits to the tax.fi website in 2015

130

3 million more visits than in 2014

120

TAX CARDS REQUESTED AT TAX OFFICES

110 2005* = 100

100 90 80

TOP 5 VERO.FI PAGES Tax card guidance

2

Credit for domestic expenses

3

Travel allowance, tax-exempt per diems

4

Income Tax Return guidance

5

VAT Tax Return guidance

70 2005

2006

2007

2008

2009

2010

2011

2012

2013

Productivity Productivity Index describes result in proportion to investment.

Efficiency Index describes the total cost of work.

The lower the index is, the better. * due to changes in taxpayer classification in the statistics, indices 2005–2011 do not fully compare with 2012–2015)

2014

2015

Efficiency

1,528,000 632,500 589,800 406,800 281,000

1

number of visits

–6.1%

VISITS TO TAX OFFICES

–10%

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FINNISH TAX ADMINISTRATION 2015

REVENUE FROM DIFFERENT TYPES OF TAX THE NET REVENUE OF TAXES

Individual income tax

euro

VAT Corporate income tax

Other taxes*

Real estate tax

billion Growth on the previous year 2.1 % Statistics on tax revenue 2015

(in Finnish only)

* Other taxes: employer’s social security contribution, gift and inheritance tax, transfer tax, tax on insurance premiums etc.

BREAKDOWN OF 2015 NET REVENUE BY TAX RECIPIENT

STATE

52.1% KELA*

* Social insurance institution

6.5%

MUNICIPALITIES

39.5%

PARISHES

1.9%

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FINNISH TAX ADMINISTRATION 2015

T

he purpose of the Tax Administration is to collect the right tax at the right time, so as to ensure our society has the financial resources it needs to function. It is for this reason that we seek to minimise the tax gap through credible tax control; and it is why it is important to maintain a culture of tax compliance, by impressing on people the importance of taxation to society.

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FINNISH TAX ADMINISTRATION 2015

MESSAGE FROM THE DIRECTOR GENERAL

W

e have done well at our task. Revenues have continued to increase, and we were able to pass on a total of more than €55 billion in tax income. Finland has one of the smallest tax gaps in Europe. Finnish tax compliance is high – almost everyone believes it is important to pay their taxes, and three out of four people feel that they get a good return on what they pay.

Our success is thanks to the skill of our staff, who enjoy a more visible presence on the pages of this revamped annual report.

HEALTH LEADERSHIP FOR PRODUCTIVITY AND WELL-BEING AT WORK A few years ago, we challenged ourselves to change how we operated and our working culture. We wanted to improve well-being at work and reduce absences due to illness. A wide range of measures

has delivered positive results. The VMBaro survey shows that our job satisfaction keeps rising. Leadership and atmosphere are central to well-being at work, and our employees’ appraisal of these has improved considerably during the past couple of years.

Absences due to illness are also on the decrease, and long-term absences in particular have declined significantly.

CHANGE TAKES US FORWARD Around 5 percent of our staff will retire between 2016 and 2020. Our challenge is to make sure that their knowledge is passed on to the next generation.

As a result of the adoption of our new off-the-shelf tax software, many of our current tasks and procedures are being overhauled. Some will be automated, but those that remain will become more diverse and will require broader and at the same time deeper knowledge. We are also remodelling our methods: new possibilities for our operations and leadership are being opened up as a result of our no-paper policy, our nationwide work queues, our open-plan offices and our embrace of telecommuting.

We offer support for skills development, and we invest in staff training. A variety of online training offerings and the extensive use of video materials have made it possible for staff to participate in training regardless of where they work.

OUR VALUES INFORM OUR ACTIONS At the beginning of last summer the Tax Administration adopted a set of new values: building trust, working together and embracing new ways of working. The shaping of these values was a lengthy process in which every Tax Administration employee could have their say.

Our values have an important role in everything we do — especially in the numerous changes we face during the coming year. This year is remarkable not only for the introduction of the new taxation software, but also for the transfer to the Tax Administration of assessment duties from Customs Finland, together with the personnel responsible.

EFFORTLESS CUSTOMER COMMUNICATION E-services have been under constant development at the Tax Administration. During the past year, we received several awards for our development of digital services. We opened the Tax24 online service in order to reduce the need for customers to visit tax offices in person and make phone calls. We also started work on the MyTax service, which will replace the bulk of our current e-services.

We want to work by focusing on the taxpayer and improving their experience. Our target is effortless eservices — so that our customers can manage their tax affairs independently, easily and cheaply.

HAPPY STAFF WORK WELL TOGETHER CREATING OPPORTUNITIES FOR ON-THE-JOB INSTRUCTORS DIFFERENT LOCATIONS, SAME ROUTINE TALK TO EACH OTHER

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FINNISH TAX ADMINISTRATION 2015

Tommi Kämpe started working at the Tax Administration in the autumn of 2015. The new Administrative Director does not need to think twice when asked whether he advocates the stick or the carrot. A working community does best when people are trusted and directors move out of corner offices and understand what their employees do every day, so that they can pick up the atmosphere and feel involved.

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FINNISH TAX ADMINISTRATION 2015

”I

HAPPY STAFF WORK WELL TOGETHER

already felt that the Tax Administration was an attractive organisation. I was pleasantly surprised when I started working here: my conception of it was true. The organisation is modern and the services work well. People are positive about development and that really shows.”

As the Director of the Administrative Unit, Kämpe and his team manage services relating to human resources, finance, premises and security. The best thing about his new job is the view of the entire organisation that it gives him, including the opportunity to meet people across Finland. The satisfaction of the personnel is important to Kämpe. He firmly believes that each employee wants to succeed at their job.

“Satisfied staff work together by dealing with daily situations and problems by themselves, without anyone else having to get involved. I don’t think it’s a manager’s job to solve small everyday problems, but to make sure that the team can keep working six months or two years later. If I spent all my time tinkering, I would be wasting it.”

Kämpe believes that making decisions on their own turf motivates people. In fact, one of the best aspects of the Tax Administration is its cooperative culture. Decisions are made at the appropriate

level, not passed higher and higher up the organisational ladder. Different ways of working are allowed and mistakes are accepted. Such a culture requires changes in everyone’s day-to-day attitudes and behaviour.

“In practice, this means that decisions that you personally wouldn’t take yourself must be allowed.

If there isn’t really anything actually wrong with a decision, it must not be corrected or condemned.”

A GOOD RESULT IN THE JOB SATISFACTION SURVEY Soon after he started working, Kämpe got to see the recent results of the VMBaro staff survey. The figures for the Tax Administration are better than average for government organisations, but Kämpe thinks they should primarily be compared against its own figures for previous years.

“Our figures have been improving slightly each year, which of course is fantastic. It is good that there has been positive development in all sectors over the past five years. The fact is that big leaps don’t really happen in an organisation with 5,000 people.”

Kämpe doesn’t see applying metrics to the organisation as a necessary evil but rather as an oppor-

VALUE

WORKING TOGETHER We succeed by building partnerships and working together. We value each other’s ideas, skills and expertise.

FOR OUR EMPLOYEES We work together as a team, allowing us to achieve excellent results.

We help each other to succeed.

We pool knowledge, expertise, information and best practice.

We are receptive to other’s ideas.

We all have a part to play in making our working environment both welcoming and inspiring.

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FINNISH TAX ADMINISTRATION 2015

HAPPY STAFF WORK WELL TOGETHER

tunity to listen to signals from employees at unit and operational unit level.

“We don’t measure well-being at work just for the sake of measuring. If the results show cause for concern, they are taken seriously and we have a mechanism for dealing with problems. I look at VMBaro as a genuine tool to help develop the organisation, and it gives us the chance to hear what the staff have to say.”

The Tax Administration is currently often used as an example of a public organisation that has succeeded well both in performing its tasks and in overhauling itself. Such success builds expectation for the future.

“How can we organise our work so that we will still be held up as an example ten or twenty years down the line? Our aims must be set high and digitalization must be mastered fully. We are not striving for a better yesterday — we’re reaching out and embracing new ways of working. I think this already shows amply in our everyday work. The people here want

to develop both themselves and the functions of the organisation. That is very positive.”

The organisation is large and offers plenty of opportunities for everyone who works here. If you want other tasks or simply need a change of scenery, the Tax Administration often has jobs that can provide a completely new perspective. This can be refreshing and inspiring.

Regardless of what they do, staff must have the desire to change the way they do it.

“Nowadays, nobody’s tasks remain the same from the start of their careers to the end. This is a place that brings old and young generations of employees together, and I think everybody needs to look themselves in the mirror. Everybody needs to adopt an open attitude towards change, because our ways of working together change constantly, as do the ways in which we serve our customers. The changes are so manifold that there can be no hope of success unless you are willing to change your own routines and ways of working.”

ANNA-LEENA TIELINEN, EDUCATIONAL PLANNER, TAX COLLECTION UNIT “We have great people working at the Tax Administration and you always get help from colleagues. It is very good that people want to renew themselves and do things ever better. I also like the fact that the employer is positive to reconciling work and leisure. Great place to work!”

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FINNISH TAX ADMINISTRATION 2015

HAPPY STAFF WORK WELL TOGETHER INVESTING IN EMPLOYEE SKILLS

THE JOB SATISFACTION SURVEY AT THE TAX ADMINISTRATION

3.85

3.77

Workplace atmosphere and cooperation

Physical environment

3.7

3.58

Job content and challenges

Management and leadership

3.57

3.34

Employer image

Support for personal development

3.26

2.95

Information flow

Payroll

JOB SATISFACTION AT THE TAX ADMINISTRATION VS IN STATE GOVERNMENT IN GENERAL

3.52

3.43

Scale 1–5

As many as 76 per cent of Tax Administration staff replied to the VMBaro survey in 2015.

The VMBaro survey is a management and development tool that measures satisfaction at work, and is used to monitor the state and development of the work community. The results of the barometer indicate what needs to be improved and where progress has been achieved.

According to the results, our strengths lie in reconciling work and private life, fair treatment from colleagues and managers, the challenging nature of work, and support from managers.

There is room for improvement when it comes to salaries, the usefulness of performance and development conversations, the openness of the work community, and realisation of the Tax Administration’s values. In almost all areas, the Tax Administration’s results are better than the government average. of staff appreciate the Tax Administration as an employer (VMBaro 2015)

Employee skills refer to the will and ability to act constructively in the work community in a way that is supportive towards one’s manager and co-workers. In 2015 employee skills were highlighted as a way of improving wellbeing at work. They were a theme of discussion in all units during the year and both managers and staff were encouraged to further develop the topic through web courses and group discussions. The material that was gathered during the year will be utilised to improve wellbeing at work over the next years.

VALUES: BUILDING TRUST. WORKING TOGETHER. EMBRACING NEW WAYS OF WORKING. The Tax Administration launched a new set of values in the spring of 2015. All employees were invited to participate in defining the values, and through many discussions and web-based brainstorming we received more than 2 000 ideas for new values. Among these ideas, the Board of Directors selected three values that support and complement each other and are integrated in all work and decision-making: Building trust, Working together and Embracing new ways of working.

61% 39%

of staff find the new values clear and understandable (VM BARO2015)

Still, only

hold the opinion that the values are implemented

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FINNISH TAX ADMINISTRATION 2015

Fifteen years ago when Essi Teppola had recently graduated from commercial college, she ran into her friend’s aunt at the local library one day. The aunt suggested that Essi might look for work at the Tax Administration.

This surprised Essi. It was something that had never occurred to her before.

Today, she couldn’t imagine working anywhere else because she works for a large employer with great opportunities for further development.

”I

had just started living in Tampere and I was 22. I called the Tax Administration’s central switchboard and asked if they could put me through to someone who would talk to somebody looking for a job. The switchboard put me through to a manager whose name I forget. I asked him directly if he could give me any work. A couple of weeks later a temporary vacancy arose because someone was going on leave. That’s how my career started with the Tax Administration fifteen years ago.”

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FINNISH TAX ADMINISTRATION 2015

CREATING OPPORTUNITIES FOR ON-THE-JOB INSTRUCTORS

Essi Teppola enjoys the variation of her tasks.

Essi’s normal work is registering new business taxpayers, entering their details into the Tax Administration’s database. Customer service is also part of her job. In addition, she gives tax guidance at events at educational institutions, on army bases and in local marketplaces where the Tax Administration reaches out to people who sometimes aren’t even aware that they need to learn more about tax.

EMPLOYER SUPPORTS FURTHER STUDY Essi likes her job, but she has a dream. She wants to study tax law at university and earn a Master’s Degree. She plans to graduate from the University of Tampere in a couple of years. It would not be possible for her to pursue her academic studies and continue working if her employer did not support her.

“Yes, it has been important that my colleagues and superiors have had a positive and helpful attitude toward my studies. There have never been any difficulties arranging to attend university lectures occasionally. I have permission to be absent for a few hours during the day, but I’m expected to make up the lost hours later in the evening. In fact, I don’t mind working late at the office when everyone has left and it’s quiet.”

TRAINING PROGRAMS HELP TAXPAYERS People with longer careers have seen a great many changes in the workplace. Right now an important one is coming: the Tax Administration is moving to a single software platform which will replace the current assortment of self-developed programs and applications. As the IT system is overhauled, a lot of established routines are becoming unnecessary.

“This major change does not feel like such a great leap because we are going to roll out the new software over a number of stages. Employees have already received a lot of instruction. They are using self-study videos and taking part in classroom sessions. We have been making test registrations in the new system and running demos that generate letters automatically to send to taxpayers.”

Nevertheless, it is going to take a long time to learn to use the new system properly. We must be bold and not afraid to experiment. The immediate impact of the new IT system will be to transform the way we work at the Tax Administration. This will soon start helping taxpayers too, as new tools assist them in understanding their tax assessments better than was the case before.

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FINNISH TAX ADMINISTRATION 2015

CREATING OPPORTUNITIES FOR ON-THE-JOB INSTRUCTORS

“For everyone who works in tax, one of the most useful skills is being able to see the big picture. One thing can often have a great many important repercussions. I enjoy my work because it allows me to look at taxpayers’ problems in a variety of different ways and identify the approach that is best suited to the specific case. I already know the most typical problems that our taxpayers face. When I give guidance, I know what points to emphasize.”

EMPLOYEE AMBASSADORS Essi is not just a dreamer, however. If an opportunity arises, she goes for it.

“I was halfway through a customer service shift when I noticed an Intranet message encouraging staff to become employee ambassadors. I began filling out the application form immediately. I complet-

ed the fields one by one between serving the taxpayers coming to my desk. It occurred to me that I was already doing the work of an employee ambassador. Participating in the ambassadorship programme would be a great way to hone my skills.”

What plans does Essi have for the future? In a few years, after gaining her Master’s Degree, will she leave the Tax Administration and start working for another employer?

“I have worked for the Tax Administration for a long time. I think it’s almost part of my identity. I love working with the people I work with, and I have no intention of leaving! I’ll definitely continue working here for 30 more years. I don’t have any other plans. The workplace will keep changing. My strategy is to embrace each change in a positive way.”

NIKO RAUTIO, PERSONNEL MANAGER, INDIVIDUAL TAXATION UNIT “One of a manager’s most important tasks is competency management. To that end the Individual Taxation Unit has set clear targets for leadership and management, and there is a wide array of courses for all management roles. Our aim is that all our managers adopt a coaching and innovative leadership approach that fosters success. Their work is strongly based on trust and cooperation.”

VALUE

EMBRACING NEW WAYS OF WORKING We want to improve. We work together with boldness and determination to overhaul our operations and develop new services. We keep up with the latest developments and seek to follow a path of continual improvement.

FOR OUR EMPLOYEES We reimagine how we do things to keep apace with the world in which we operate.

We put a premium on professional skills and work to develop them in order to meet our needs going forward.

We use the very latest tools, workspaces and methods and deploy them in fresh and innovative ways. We inspire one another and feel free to experiment with new ways of working.

20

CREATING OPPORTUNITIES FOR ON-THE-JOB INSTRUCTORS

FINNISH TAX ADMINISTRATION 2015

TOP TRAINING COURSES 2015, CLASSROOM

1

Tax auditors’ annual conference

2

Overhaul of the Palkka.fi e-Service

3

Using the new forms and instructions for Inheritance and Gift taxation

66 9,607 Intranet training sessions were held for

participants

TOP TRAINING COURSES 2015, INTRANET Intranet based training sessions and video lectures give staff the same opportunities to take part wherever they are in Finland.

1 2 3

Training Video Clips have been viewed

314,613 times

In 2015, more than

How to arrange a hearing Introduction to tax assessment of individuals in cross-border situations What you should know about Performance Appraisals

800 35,000 instruction sessions were arranged for staff, and more than

credits were awarded to participants

20%

of our staff have worked as instructors for on-the-job training schemes

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FINNISH TAX ADMINISTRATION 2015

Sanna Savolainen manages a small control team. The team’s focus is on guiding the corporate income tax process. Sanna works just off the market square in Kuopio, while team member Lauri Tuomarla is based in Helsinki.

Previously, you would catch your manager in the hallway — now you send them an instant message online.

22

FINNISH TAX ADMINISTRATION 2015

”M

DIFFERENT LOCATIONS, SAME ROUTINE

y team’s work would get nowhere if we didn’t have these new tools at our disposal”, says Sanna. “All the members of my team are in Helsinki, as is my own manager.”

In the mornings, as their computers are switched on across Finland, all the team members have a clear common purpose. Each of them takes care of their own area of responsibility, calling on the skills of the others when needed. First thing in the morning, Lauri looks through his emails and tries to remember to check the Tilt info for any technical disturbances. Sanna meanwhile checks her calendar and decides whether she can attend the day’s telephone conferences from at her desk or if she needs to book a room.

“I know what the people at the other end of the conference call look like. I know their tones of voice, so I think hearing them is almost the same as seeing them. My own team has become very familiar to me”, Lauri says.

Sanna and Lauri can’t enjoy coffee breaks with their team, and laughing at jokes that their colleagues crack often requires turning on their microphones in phone meetings. Showing up for work everyday is nevertheless straightforward enough.

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FINNISH TAX ADMINISTRATION 2015

DIFFERENT LOCATIONS, SAME ROUTINE

“I naturally spend coffee breaks with my colleagues in Kuopio, but I still primarily feel like I’m part of the Helsinki community, because our tasks within the Steering and Development Unit are so similar”, says Sanna.

DISTANCE DOES NOT INHIBIT BRAINSTORMING Despite the physical distance, the ability to cooperate closely and brainstorm is what makes the team strong. Mutual trust binds the team and the working community together. The organisation saves time and money since people travel less. It is also better for the environment.

“Phone meetings quickly started to feel natural. It almost makes me smile to think about the time when people travelled to the Helsinki area from different parts of Finland once a month to arrange things that are now taken care of by phone”, Lauri says, rolling his eyes.

Sometimes it makes sense to work from home wearing woolly socks. Other times, you can work from an office near your home, where it’s quick to commute. Sanna and Lauri naturally think it’s good for everyone that the work day is made as easy as possible.

“In a way, you could think that working hours become more flexible as soon as you start using laptops instead of desktops. If it’s easier for you, it is

possible to work from home at any time — even evenings — but that shouldn’t be the default”, says Lauri.

In Sanna and Lauri’s case, where the work is done is almost immaterial: the distance between the team members is in any case about 400 kilometres.

“I telecommute from home especially on days with a lot of phone meetings. Instead of booking a room at work, I attend meetings from my couch or my kitchen table. In the afternoon, I can close my laptop and take a walk with our dog Otto. We have very good opportunities for reconciling work and free time, and I think that a certain freedom of choice reflects positively upon our results”, Sanna says.

Lauri elaborates. “If you need to go somewhere near your home during the day — say you have to take your child to the doctor’s — you can save as much as two hours by working from home that day.

Saving time is worthwhile from everybody’s perspective”, Lauri continues. ”Although lots of things work well in our team, there are still minor changes to be made in your own work. I would like to reply to all my emails straight away, so that they aren’t left lingering in my inbox.”

Sanna and Lauri would also like to point out the benefits of new ways of working to others.

“Be open to new opportunities and make maximum use of them. Embracing these tools really pays off.”

VALUE

BUILDING TRUST Trust and transparency are central to what we do. We collect the right tax at the right time in order to fund public services.

FOR OUR EMPLOYEES We operate in a way which is open, consistent and fair.

We know when to delegate and when to take responsibility; we keep our promises.

We trust in each other’s abilities.

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FINNISH TAX ADMINISTRATION 2015

DIFFERENT LOCATIONS, SAME ROUTINE

TELECOMMUTING AT THE TAX ADMINISTRATION THE AVERAGE NUMBER OF TELECOMMUTING DAYS

4

per month (September 2015)

TELECOMMUTERS

of staff (1,000 people)

NEW WAYS OF WORKING

An increasing number of Tax Administration employees work in open-plan offices with no designated rooms or work stations. The work spaces are divided into different areas, by level of interactivity. Conversation is allowed in some areas, whereas others are reserved for work that requires silence or for phone meetings. Work can also occasionally be done at another Tax Administration branch or at a service centre shared by several government agencies.

1,400

Tax Administration employees work in open-plan offices

Presence at the work place is no measure of employee productivity Sanna Savolainen

66%

TELECOMMUTING DAYS

1–2 days a week or occasionally

of staff are happy with their working spaces and tools (VMBaro 2015)

E-TOOLS PART OF THE WORK ROUTINE In 2015, the staff that was about to move to the contemporary open-plan office received coaching for adopting new ways of working. The goal was for staff to make e-tools a part of their daily routine. A toolbox for straightforward work was created on the Tax Administration intranet. The toolbox gathered guidance for everything from paperless working to tips on how to smoothly change work stations during the day. Replacement of old work methods is already up to speed and new technical prospects are constantly made use of.

TELECOMMUTING UNDERLINES the target-orientation of work following up the productivity of work trust between the employee and the manager the ability to work independently

WORK POST DEPENDING ON THE DAY’S TASKS Working hours are still measured by traditional methods. However, in addition to standard flexitime arrangements, hours can be adjusted according to the individual’s life situation and even the season.

of staff are content with the opportunities for reconciling work and private life (VMBaro 2015)

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FINNISH TAX ADMINISTRATION 2015

If tax auditor Anssi Immaisi — who has also trained as a mediator and work supervisor – were to give workplaces one piece of advice, it would be this: draw potential conflicts into the open by dealing with the people involved quickly and decisively. Conflicts generally become more damaging if they are left to fester.

A

nssi, who has worked for the Tax Administration for almost ten years, is not just a Tax Auditor. Certainly, he audits three different types of taxes and works on specialist inspection projects; and he studies to expand his professional knowledge, just like everyone else at the Tax Administration. But in addition to his primary tasks, Anssi also mediates workplace conflicts, except for those that may arise in his own community, for reasons of trust.

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FINNISH TAX ADMINISTRATION 2015

TALK TO EACH OTHER

of Tax Administration staff are satisfied/very satisfied with the workplace atmosphere and cooperation.

(VMBaro 2015)

“All the aspects of my job are very varied and challenging — the auditing, the supervision and the mediation. Fresh insight is the reward for getting into situations that can sometimes be uncomfortable.

Each one teaches me something new.”

TEN WORKPLACE MEDIATORS In the summer of 2015, ten mediators were trained to resolve conflicts and disagreements within the Tax Administration work communities. Anssi noticed the ad on the mediation training on the Tax Administration’s intranet and decided to sign up.

“I thought it was great. Mediation would be a great fit with my previous skills, seeing as I had graduated as a work supervisor from the University of Turku in 2015. The programme was three years long and I finished it while I was working. I did my study placements at the Tax Administration. I helped people to evaluate and develop their own work on a practical level.”

The wheels are set in motion when mediators are contacted. Often it is managers that ask for support.

Once the process has kicked off, a preliminary meeting is held. All parties to the conflict are invited, and together they discuss why a mediator has been called in. After the initial meeting, the mediators meet with each party individually. Everyone is

given time to explain what has happened and what their own personal experience of the situation is.

Next comes processing. The mediator’s task is to probe further, summarise and give guidance. The main responsibility, however, lies with the participants. If an agreement is reached, it is put into writing and signed. After a few months, the mediator will revisit the issue and see how well the agreement has been followed. If necessary, adjustments are made and a potential follow-up meeting scheduled. After that, it falls to line managers to monitor the situation and the mediation process is wrapped up.

work community mediators

WORK COMMUNITY MEDIATION Mediators assist in solving a variety of conflicts or bullying at work.

PERSONAL RESPONSIBILITY AND THE DESIRE TO FIND SOLUTIONS The basic idea behind the process is that people can reach an understanding and agreement if they are listened to and their voices heard. It may sound easy, but often it is monumentally difficult.

The basic idea behind the process is that people can reach an understanding and agreement if they are listened to and their voices heard. It may sound easy, but often it is monumentally difficult.

“In hierarchical organisations, people often develop a way of thinking in which conflict is always resolved by an outside party, like a boss. Mediation stresses personal responsibility and the desire to

Mediation is an example of a new method that has been tested to deal with conflict.

While the number of instances of conflict grew slightly in 2015, there has been some improvement in managing the situations. We are on the right track.

27

FINNISH TAX ADMINISTRATION 2015

TALK TO EACH OTHER

Reduction in absences due to illness

find a solution. Everyone must take responsibility to achieve reconciliation. No punishments are given out; no blame is ascribed. This can actually be an alien concept, if problems have previously always been solved by someone else.”

Anssi’s strengths as a mediator are his calm, analytical nature, his expert training and his methodological know-how. In mediation cases he presents a composed, confidence-inspiring exterior, beneath which lies a sound professional competence for navigating the choppy waters of workplace discord.

“A good working atmosphere where good results are achieved is one where people trust that others

have their best interests at heart. You may disagree about certain things and there can be tough discussions, but the premise is always good will towards others. Trust is tricky to measure, but you can usually tell if it’s not there.”

Sometimes situations of conflict are tough on the mediator, too. Anssi bounces back from difficult cases by chopping wood at his family farm, lifting weights at the gym and by reading. His favourite books are war novels and non-fiction about mediation.

“As it is, my work is very varied, and I wouldn’t like to give up any part of it. The best things about the Tax Administration are its stability and security. But I still think that my work place keeps up to date and embraces change.”

PÄIVI VIERTOLA, HEAD OF OFFICE, INDIVIDUAL TAXATION UNIT “One of the tasks of a manager is to intervene at an early stage in order to prevent, in advance, factors that may harm an employee’s capacity to work. The capacity to work depends not only on one’s physical health but also on the atmosphere of the workplace. In particular when problems are prolonged, an outside mediator may solve the situation better than the manager.

It is however important to keep in mind that the earlier problems are addressed the easier they are to solve.”

HEALTH LEADERSHIP Aiming at better coping, motivation and productivity at work Health leadership looks for operating models that serve to maintain and enhance staff’s ability to work. The Tax Administration’s goal is for its staff to cope better, enjoy higher levels of motivation and productivity and suffer fewer absences due to illness.

To this end, a number of practical steps are being taken. We are trying out a new, more flexible way of notifying absences due to illness, and providing support to help people quit smoking.

There is also a pilot project to help staff manage their workloads, targeted in particular at our older employees.

Health leadership is target-oriented and informs about the work of staff and management across the organisation from top to bottom.

Success is gauged in terms of the VMBaro survey, which focuses on well-being at work. The relevant sections are those that deal with serious conflicts and how they are managed; leadership and community interaction; internal atmosphere and cooperation; opportunities to influence the content of your own work; and personal reflections as to how clearly the work is focused.

TAX REVENUE DEVELOPMENT SOURCES TRANSFERS

UNPAID TAXES EFFICIENCY VAT GAP

29

FINNISH TAX ADMINISTRATION 2015

In 2015, gross revenue of taxes collected by the Tax Administration totaled €70.5 billion. Refunds made to taxpayers during 2015 amounted to €15.4 billion.

After refunds, we were able to pay €55.1 billion on to recipients (net revenue).

NET TAX REVENUE AND REFUNDS, 2011–2015, MEUR

NET REVENUE 48,493 49,762 52,681 53,979 55,124

TAX ADMINISTRATION

Net revenue

€55.1G

Revenue of taxes

€70.5G

(Gross revenue) Tax refunds

€15.3G

THE NET REVENUE OF TAXES

billion Growth on the previous year 2.1 %

STATE €28,673M MUNICIPALITIES €21,769M SOCIAL INSURANCE INSTITUTION €3,596M PARISHES €1,046M

Statistics on tax revenue 2015 (in Finnish only)

2011

2012

2013

2014

2015

The revenue amount (55,086) differs slightly from the net revenue for the 2015 calendar year (55,124) because transfers to tax recipients other than the state are made once a month, and the accrual period already starts on the 18th of the previous month (in this case 18 December 2014) and ends on the 17th of the transfer month (in this case 17 December 2015).

30

FINNISH TAX ADMINISTRATION 2015

The net revenue for 2015 collected by the Tax Administration amounted to €55.1 billion. This represents an increase of €1.1 billion (+2.1%) on the previous year. The growth in revenues from individual income tax accounts for over half of the total increase, while the rise in corporate income tax revenues explains the rest.

In monetary terms, INDIVIDUAL INCOME TAX saw growth of €612 million (+2.1%), largely attributable to a rise of approximately 2% in the overall level of income tax.

The net revenue for CORPORATE INCOME TAX 2015 from showed a rise of 15% — comparable

in monetary terms to that for individual income tax.

However, this must be seen in the context of modest revenues for 2014. Prepayment receipts were excessively low in 2014 which meant that a number of corporate taxpayers still had to pay their taxes for 2014 in 2015.

€M

Individual income tax VAT Corporate income tax

Other taxes*

8.3%

8.4%

Real estate tax

25.8% 2.9%

Change Change

(€M)

(%)

TOTAL NET REVENUE

55,124 1,145

2.1

Individual income tax

30,081

612

2.1

Corporate income tax

4,567

580

14.5

14,248

113

0.8

Employer’s social security contribution

1,663

−26

−1.5

Real estate tax

1,605

93

6.2

Other taxes*

2,959 −227

−7.1

VAT

REVENUE FROM DIFFERENT TYPES OF TAX

54.6%

BREAKDOWN OF NET TAX REVENUE,

BY TYPES OF TAX

*Other taxes: employer’s social security contribution, gift and inheritance tax, transfer tax, tax on insurance premiums etc.

31

FINNISH TAX ADMINISTRATION 2015

INDIVIDUAL INCOME TAX

REVENUE FROM VALUE-ADDED TAX

INCOME TAX REVENUE

Revenues from individual income tax accounts for over half of the total.

Revenue from value-added tax remains stable for three years in a row.

Corporate income tax revenue increased with 15 per cent.

The gross revenue from income tax paid by individual customers reached €30.1 billion. This accounted for more than half of the gross revenue collected by the Tax Administration. It showed a growth of €612 million (+2.1%) year-on-year.

The majority of income tax consists of withholding tax, with an increase of €579 million (+2.1%).

However, this increase was weaker than that of 2011–2014, when annual growth rates were between 3.5% and 4.8%. The 2015 rate of increase is slightly higher than the 2010 rate when growth was slow.

The 2015 net revenue from VAT totaled €14.2 billion, representing an increase of €113 million (+0.8%) on the previous year. This indicator has remained almost the same for three consecutive years. The VAT on imports, collected by Customs Finland, is not included.

The gross revenue from corporate income tax increased by €580 million, to almost €4.6 billion (+15%). Of the elements of corporate income tax, gross revenue from prepayments increased by €280 million (+8.9%). The amount of supplementary payments increased by €141 million (+14%), back taxes by €98 million (+23%), while there was a decrease in refunds refunds of prepayments amounting to €61 million (–11%).

€M

Change Change

(€M)

(%)

INDIVIDUAL INCOME TAX

30,081

612

2.1

Withholding taxes

28,510

579

2.1

Taxes withheld on dividends Prepayments Supplementary prepayments Back taxes/prepayment refunds

601

103

20.7

1,580

7

0,4

629 −1,238

−91 −12,7 14

1.1

€M

Change

Change

(€M)

(%)

NET REVENUE FROM VAT

14,248

113

0.8

Gross revenue

25,790

704

2.8

Refunds

11,542

591

5.4

Among the most important sectors of the economy, the 2015 net revenue from VAT went down in retail (–2.8%) and IT/Communications (–5.5%). It increased in manufacturing (+6.1%) and construction (+6.5%).

Net revenue from VAT, by sector of business

€M

Change Change

(€M)

(%)

CORPORATE INCOME TAX REVENUE

4,567

580

14.5

Prepayments

3,412

280

8.9

Supplementary prepayments

1,144

141

14.1

Back taxes/prepayment refunds

11

158 107.5

32

FINNISH TAX ADMINISTRATION 2015

The Tax Administration passes on the tax revenue accrued in its accounts to providers of public services: central and local government, the Social Insurance Institution (Kela) and parishes.

In 2015 these tax recipients received a total of EUR 55.1 billion in tax revenue, which was EUR 1 billion more than the year before (+ 1.5 %).

AMOUNTS TRANSFERRED TO TAX RECIPIENTS IN 2015 Change

Change

Recipient CENTRAL GOVERNMENT Income tax; earned and capital income Corporate income tax VAT Other state taxes

€M 28,673

(€M) 501

(%)

9,094

–23

–0.2

2,761 14,214 2,603

329 115 80

13.5 0.8 3.2

MUNICIPALITIES

21,769

601

2.8

18,524

331

1.8

1,641 1,603 1,046 921 124 3,596 1,934 1,662 2 55,086

179 92 19 10 9 –47 –18 –28 –25 1,049

12.2 6.1 1.8 1.1 7.7 –1.3 –0.9 –1.7 –92.2 1.9

Municipal income tax Corporate income tax Real estate tax PARISHES Church tax Corporate income tax FPA Health insurance Employers’ social security FORESTRY FEES Total taxes and charges

1.8

Services for tax recipients

(in Finnish and Swedish only)

TAX REVENUES PASSED ON TO TAX RECIPIENTS €M

Change (%)

2011

48,998

7.8

2012

50,261

2.6

2013

53,213

5.9

2014

54,037

1.5

2015

55,086

1.9

CENTRAL GOVERNMENT For central government, two thirds of the growth is due to the increase in corporate income tax, while the rest is attributable to increased VAT and other taxes. Because the transfers of tax on earned income and capital income to central government include taxes at source, which decreased by some EUR 260 million, this shows as a decline in the overall transfer amount.

MUNICIPALITIES Out of taxes transferred to municipalities, municipal income tax with an increase of more than EUR 300 million (1.8 %) grew the most. The average municipal income tax rate rose by approximately 0.5 per cent, which also increased the tax income of municipalities. Transfers of corporate income tax and real estate tax also increased.

PARISHES Church tax and corporate income tax accumulated some EUR 10 million more to parishes compared to the previous year.

KELA Insurance payments and employers’ social security contributions transferred to the Social Insurance Institution (Kela) decreased as a result of lowered payment rates.

FORESTRY FEES Transfers of forestry fees decreased by more than 90 per cent, because full fees were now only transferred to the Åland Islands forestry association.

Transfers are made to tax recipients monthly. Each month, the taxes accrued between the 18th of the previous month and the 17th of the present month are transferred. On account of this, especially the numbers for specific tax types differ from net revenues, for which the statistic periods are a calendar month and a calendar year.

33

FINNISH TAX ADMINISTRATION 2015

At the end of 2015, unpaid taxes totaled EUR 4.4 billion.

This total includes tax arrears (EUR 4.2 billion) and a deficit in tax accounts amounting to EUR 179 million. The amount of tax arrears increased

by EUR 308 million (8%), while the deficit amount in tax accounts decreased by EUR 15 million (–7.8%). The reason for tax arrears may be genuine insolvency or a deliberate failure to pay taxes.

TAX ARREARS, 2011–2015, TAX ACCOUNTS WITH NEGATIVE BALANCE, 2013–2015

UNPAID TAXES INCOME TAX, INCLUDING PREPAYMENTS

43.3 % 17.4 %

WITHOLDING TAX AND SOCIAL SECURITY CONTRIBUTIONS

TAX ARREARS COLLECTED THROUGH DIFFERENT MEASURES Change

VAT

37.1 % 2.2 % OTHER TAXES

Most of the unpaid taxes were income tax and its prepayments (43 %) and VAT (37 %).

Negative balances, Tax Accounts, €M

2015

4,173

179

4,352

2014

3,865

194

4,059

2013

3,730

191

3,921

2012

4,084

-

-

2011

3,898

-

-

Total

Tax account payment reminders

1,355

28

Recovery measures

1,653

–84

Payment reminders

335

5

Customer-specific recovery measures*

417

–9

Recovery of taxes through enforcement

347

5

*The accrual rate for customer-specific recovery measures is 53.6 per cent.

Reports of crime

BREAKDOWN OF TAX ARREARS

Tax arrears, €M

€M (€M)

550 times

Of the tax arrears EUR 1.2 billion (28%) were taxes unpaid by individual customers and EUR 2.8 billion (72%) by corporate taxpayers. reports more than 2014

CORPORATE TAXPAYERS

72 %

INDIVIDUAL CUSTOMERS

28 %

34

FINNISH TAX ADMINISTRATION 2015

The Tax Administration aims to operate productively and cost-effectively.

Productivity is measured by the number of outputs in relation to one person-year, while cost-effectiveness relates to the cost per unit of output.

NET OPERATING EXPENSES STAYED AT THEIR 2014 LEVELS

IN ACCOUNTING, ANNUAL COSTS GREW BY 1.9%

The net operating expenses of the Tax Administration decreased by 0.1% on the previous year.

The 2015 operating expenses were €7.6 million higher than in 2014. The growth is explained by a change in the accounting schedules of holiday pay and new entries in ”work performed for own purposes” accounts.*

NET OPERATING EXPENSES 2005–2015, INDEX-ADJUSTED €M

WE IMPROVED OUR PRODUCTIVITY AND COST-EFFICIENCY AS THE NUMBER OF TAXPAYERS INCREASED

GROWTH IN PRODUCT The number of taxpayers increased, and we were able to improve our productivity. This indicator shows a positive trend although the number of person-years increased slightly from 2014.

400

* The IT project cost is booked as part of the operating expenses of the accounting years when program development is ongoing, and when the IT systems are completed, the increase in yearly depreciation will reflect its development expense year-to-year. Both these factors made the 2015 operating expenses higher when compared to the previous year.

THE TAX ADMINISTRATION’S OPERATING EXPENSES 2011–2015

376.1

€M

367.2

415.0

350

400

380.1

EFFICIENCY GROWTH Although there was an increase in operating expenses, cost-efficiency improved when compared to that of 2014. This is also a result of the increase in the number of taxpayers.

350

2010 2005

2007

2009

2011

2013

2011

2012

2013

2014

2015

2015

Personnel costs are

of total cost

35

FINNISH TAX ADMINISTRATION 2015 Download the report

The VAT gap is the difference between the potential tax revenue under the tax rules and the actual revenue received. Factors giving rise to this type of gap include deliberate non-compliance, lack of knowledge about VAT rules, and financial difficulties. The Tax Administration’s operations and our tax system can be reviewed based on development of the tax gap.

According to a report by the European Commission assessing the VAT gap in European Union member states in 2009– 2013. In Finland, as in Sweden and Denmark, the VAT gap is among the smallest in EU member states. It has remained essentially unchanged during the years in question.

Collected VAT amounted to

remained uncollected

THE VAT GAP IN EUROPEAN UNION MEMBER STATES IN 2013

41.1 % 37.7 %

VAT gap in Finland

Average VAT gap within the EU

33.6 %

34.0 % 34.9 %

29.8 %

22.4 %

15.2 %

24.4 %

26.4 % 26.7 %

16.5 % 16.8 % 17.2 %

10.5 % 10.6 %11.2 % 11.4 % 8.9 % 9.0 % 9.3 % 9.8 %

Romania

Lithuania

Slovakia

Greece

Italy

Latvia

Poland

Malta

Hungary

Czech Republic

Bulgaria

Estonia

Spain

EU average

Austria

Germany

Ireland

Belgium

United Kingdom

Denmark

Portugal

France

Slovenia

Luxemburg

Sweden

The Netherlands

Finland

5.1 % 5.8 % 4.1% 4.2 % 4.3 %

UNITS CORE PROCESSES MANAGEMENT GROUP STAFF GUIDANCE PROJECTS

LEGISLATIVE AMENDMENTS DIGITALIZATION THE GREY ECONOMY INTERNATIONAL COOPERATION TAX COMPLIANCE

37

FINNISH TAX ADMINISTRATION 2015

The Tax Administration is divided into three national sectors: Individual Taxation, Corporate Taxation and Tax Collection.

Each sector has a Steering and Development Unit in Helsinki, while they maintain tax offices in all regions of Finland. From January 2015, the Corporate Taxation Unit has been in charge of corporate tax assessments and tax field audits.

As support for the taxation units, the Tax Administration has several smaller units that take part in ensuring the effective actions of the organisation.

Rules of procedure Verohallinnon työjärjestys, in Finnish and Swedish only

TAXATION UNITS 2015

Units and the percentages of the Tax Administration’s personnel INDIVIDUAL TAXATION

CORPORATE TAXATION

TAX COLLECTION

ADMINISTRATION

IT SERVICES

Taxation of individual taxpayers, business owners and self-employed individuals.

Individual taxation covers income tax and tax prepayments as well as inheritance tax, gift tax, transfer tax and property tax

Serves and gives guidance to limited-liability companies, cooperatives, associations and foundations. Manages customer data, carries out tax assessments, including a number of control measures Tax auditing of all corporate customers.

Cash-flow management, collection, recovery and transfer of tax revenues

Personnel, financial, and general administration

Information technology provision

49.4%

29.3%

9.2%

VALMIS PROGRAM

TAX RECIPIENTS’ LEGAL SERVICES

EXECUTIVE AND LEGAL UNIT

Information system development with the objective to replace current tax IT solutions with a commercial off-the-shelf software application

Oversees the rights of tax recipients in taxation matters and tax appeals

Top management tasks and preparation of official decisions issued by the Director-General

1.5%

0.7%

0.7%

COMMUNICATIONS

GREY ECONOMY INFORMATION

INTERNAL AUDITING

Group-level communications, web and language services

Provision of information on grey economy and combatting grey economy with other authorities.

Assessment of the sufficiency of internal control within the Tax Administration

0.6%

0.5%

0.1%

4.1%

3.6%

Bodies independent of the Tax Administration are the Central Tax Board, preparer of advance rulings, and the Board of Adjustment, which works with appeals against tax decisions.

38

FINNISH TAX ADMINISTRATION 2015

PROACTIVE GUIDANCE AND ADVICE

MANAGEMENT OF MONEY FLOWS

The proactive guidance and advice process ensures that customers know how to declare and pay their taxes correctly, on their own initiative and on time. Proactive guidance is also used to promote customer attitudes toward tax compliance.

The management of money flows process covers incoming and outgoing payment traffic; accounting of tax revenues; transfer of tax revenue to tax recipients; and analysis of tax revenue and forecasting of cash flows for the needs of central government cash management.

TAX AUDITS The goal of the Tax Audits Process is to help our customers act right. It must ensure that they give correct and sufficient information for tax purposes. At the same time, we ensure that tax recipients receive their part of revenues at the right time and to the right amount.

39

FINNISH TAX ADMINISTRATION 2015

31.12.2015 The Tax Administration Management group sets the Administration’s long-term strategic goals, addresses the questions of resources at the central level including finances, personnel, office space, operative planning and follow-up.

Pekka Ruuhonen Director General, Chair Markku Heikura Chief Information Officer IT Services Unit Sanna Alamäki Senior Director Corporate Taxation Unit

Kirsi Huhtamäki Chair Verovirkailijain liitto ry (Tax Official Union)

Leena Wikström Senior Director Tax Collection Unit

Heli Lähteenmäki Senior Director Individual Taxation Unit

Mikko Mattinen Communications Director Communications Unit

Timo Räbinä Chief Tax Ombudsman Tax Recipients’ Legal Services Unit

READ Rules of MORE procedure

(in Finnish and Swedish only)

Janne Marttinen Director Grey Economy Information Unit

Maarit Turunen Director Internal Auditing Unit

Tommi Kämpe Administrative Director Administrative Unit

Tiina-Liisa Forsell Quality Manager Executive and Legal Unit Eija Lönnroth Program Director Valmis program

Arto Pirinen Strategy Director Executive and Legal Unit

40

FINNISH TAX ADMINISTRATION 2015

75%

5,089 4,877 persons

Person-years

women

PERSONNEL NUMBERS IN 2005–2015

6,285

5,089

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

25% men

The number of Tax Administration staff exceptionally grew in 2015. The growth was target-oriented and anticipated the staffing needs of large ongoing projects, as well as new ones under preparation. The projects include the adoption of new off-the-shelf taxation software, the establishment of the national income register and preparations for the transfer of the taxation duties of Customs Finland. New tasks and demands that came about during the past few years furthermore increased the staffing needs. Despite the increase, the number of person-years was smaller than what was agreed with the Ministry of Finance.

DISTRIBUTION OF STAFF BETWEEN THE UNITS

Tax Collection

Individual Taxation

Corporate Taxation

49.4%

29.3%

* Valmis Program 1.5 percent, Tax Recipients’ Legal Services, 0.7 procent, Executive and Legal Unit 0.7 procent, Communications 0.6 procent, Grey Economy Information 0.5 procent, Internal Auditing 0.1 procent

9.2%

Administration Other units *

4.1%

IT services

3.6%

4.1%

41

FINNISH TAX ADMINISTRATION 2015

LEVEL OF EDUCATION

Postgraduate 1%

of staff have a Bachelor’s, Master’s or polytechnic degree

Basic education

5%

Not known

8%

23%

Master’s

17%

Bachelor’s or polytechnic

34%

Lowest tertiary

12%

Upper secondary

For several years, it has been the goal of the Tax Administration to increase the share of staff that have a Bachelor’s, Master’s or polytechnic degree. At the end of 2015, 40.7 per cent of staff had one of these degrees (39.2 per cent in 2011).

For people below the age of 45, it is most common to have such a degree, whereas individuals older than 45 most commonly have a lowest level tertiary education.

BREAKDOWN OF STAFF BY AGE Pers 200 180 160 140 120 100 80 60 40 20 20

30

40

50

60 Women

70

Year Men

The average age of Tax Administration staff is 49.1 years. For remaining public administration, the average is 45.6 years. The biggest age group is people between 60 and 64 years of age (20 per cent). The fact that baby boomers are retiring poses a challenge for the Tax Administration.

Plans must be made to ensure that knowledge is passed on to coming generations and that work can be managed with less staff. The Tax Administration wants to recruit the most skilled professionals and be a competitive employer. Investing in good staff policy will continue to be an important part of our job.

Average age of Tax Administration staff

years Average age of Tax Administration staff

years

42

FINNISH TAX ADMINISTRATION 2015

The Ministry of Finance and Parliament guide the Tax Administration’s operations by granting us allocations and setting our performance targets.

Targets are also set in the budget adopted by Parliament and, in particular, the performance agreement concluded with the Ministry of Finance. Every year, written feedback report on the activities of the Tax Administration is prepared by the Ministry of Finance.

THE MINISTRY IS SATISFIED WITH OPERATIONS The Ministry’s feedback on 2014 noted that our impact and productivity should be monitored in parallel. Regardless of the stringent spending limits, the impact and quality of our activities must not be compromised.

POSITIVE COMMENTS We met our performance targets.

Our productivity improved considerably.

We continue to improve operations despite a tightening budget.

Our staff’s well-being at work has improved, resulting in better scores than for other public bodies.

The use of our e-Services increased as planned.

Taxpayer satisfaction level continues to be good.

Taxpayers are satisfied with our service offerings.

MORE ATTENTION MUST BE DEVOTED TO The number of tax audits has increased, as a cause by the new real-time audit procedure.

More information is needed about the factors that explain the growth of tax arrears in order to take correct and effective measures.

Our taxation process has to be safeguarded during the implementation of the new Valmis software system.

FRAMEWORK FOR LONG-TERM PLANNING The most important document for guiding longterm operational planning is the Government Programme. Each year, the Government budget is drafted for a four-year period based on the Programme. The budget decisions were partly revised in autumn 2015, and the final decision for the 2017–2020 period is to be published in October 2016. Current government sets its more precise objectives with the help of spearhead programs.

The budget decision takes a stance on the funding of development projects proposed by the Tax Administration. Development projects may be linked to legislative amendments, changes in technology, or development as outlined by the Tax Administration strategy. In the performance agreement between the Ministry of Finance and the Tax Administration, the Ministry sets social-impact targets and other productivity targets.

SOCIAL-IMPACT TARGETS FOR 2015 taxation activities without disruption reduction of the tax gap Maintaining taxpayers’ positive attitudes toward taxation, furthering compliance

43

FINNISH TAX ADMINISTRATION 2015

PROJECT

DESCRIPTION

STRATEGIC GOALS

VALMIS Program

Implementing the GenTax software system in 2015–2019 in order to replace existing IT applications. This ensures the Tax Administration’s operational reliability and reduces IT expenses.

Ensuring operational reliability

International tax risk study project

Study of the risks inherent in cross-border operations. This project improves proactive guidance and monitoring, promoting for enhanced international cooperation between tax administrations.

Narrowing the tax gap, reducing tax flight, combatting the underground economy

Project “FATCA”*

Providing facts and information on the bank deposits of U.S. citizens under the Foreign Account Tax Compliance Act of the United States: we receive annual information reports from banks and other finance sector, monitor their compliance with the reporting requirement, send on the figures to the Internal Revenue Service. The project also involves receipt of inbound facts and information from the U.S.A.

Narrowing the tax gap, combatting the underground economy

Construction sector reporting project

Enhancement of a risk-management framework focusing on the construction industry involving monthly reports on every building site and its construction workers.

Combatting the underground economy

National Registration of Income Data (KATRE)

Online database for immediate registration of amounts paid to individuals, collecting real-time data for each payday. Uniform standards for online registration are agreed.

Reducing the administrative burden, narrowing the tax gap

44

FINNISH TAX ADMINISTRATION 2015

PROJECT

KEY PROJECTS IN 2015

DESCRIPTION

STRATEGIC GOALS

Tax Gap analysis project

Continued study of the various reasons for the existence of a tax gap.

Narrowing the tax gap, combatting the underground economy

Improvement of tax risk management and analyses

Risk management project; redesign of tax-risk analysis and continued support of its processes.

Narrowing the tax gap

Automatic sharing of compliance reports

Building a sharing framework for monitoring the business enterprises applying for subsidies (a Ministry of Finance-supported project).

Combatting the underground economy

IT capacity project

A project for transfer of servers to a new service provider. Increased computer capacity creates a platform for Valmis and identity management system projects.

Ensuring operational reliability

National Data Exchange Layer (KAPA)

Building a simpler, more powerful data transmission facility (to meet the needs of Online Income Registration, XBRL and Online VAT base projects). The National Data Exchange Layer also provides interfaces for open source data, access to the Tax Administration and local government.

Cost reduction through e-File, improvement of IT compatibility and promoting effective database utilization for administrative purposes.

Merging the tax assessment functions run by Customs Finland with ours (Project “VETO�)

Excise tax, motor vehicle tax, VAT on imports will be assessed by the Tax Administration instead of Customs Finland, with approximately 200 employees changing their contracts.

Cost reduction, improved coordination, reduction of the administrative burden.

45

FINNISH TAX ADMINISTRATION 2015

INDIVIDUAL TAXPAYERS

CORPORATE TAXPAYERS

MUNICIPALITIES

DEDUCTIONS CLAIMED FOR COMMUTING EXPENSES now have a higher minimum threshold: expenses may only be claimed if they exceed €750 (previously €600).

FAMILIES WITH CHILDREN are entitled to a new tax credit, which partly compensates for the recent cuts in child allowance payments.

The tax credit is automatically granted to individ­ ual taxpayers who have children in their care — information on this is registered officially.

NEW TAX RULES are in force making distributions of profit surplus taxable, which equalizes the taxation of cooperatives with that of limited-liability companies.

MUNICIPAL INCOME TAX The tax base for municipal income tax was strengthened by raising the upper and lower limits for the general real estate tax rate. The municipalities decide their rates for real estate tax within the set range.

TAX ON GIFT AND INHERITANCE was increased with one percentage point in all tax brackets.

Taxation in change-of-generation situations experienced a relief. At the taxpayer’s request, they can pay the amount during a ten-year period.

REVERSE CHARGE VAT was introduced in the sector of scrap metal trading and processing, in order to combat grey economy. Under the reverse-charge scheme, the buyer of goods pays VAT instead of the seller. The scheme has previously been applied in the construction sector.

46

FINNISH TAX ADMINISTRATION 2015

The digital Tax Administration has successfully been developed since long ago.

We want to meet the expectations of our customers and offer them e-services that are easy to use. We aim at increasing the level of automatization and de-

creasing the need for visits and phone calls. The replacement of the numerous Tax Administration data systems with one single taxation software package

(the Valmis program), the MyTax service being created for taxpayers, and the Income Register are important building-blocks for reaching our goals.

ROADMAP OF DIGITAL HISTORY

2010 Tax Account Online

2010 Paper digitising for nationwide electronic work queues

2009 BIS e-service (YTJ)

1997 TYVI e-services - details from businesses to the authorities

2012 Account number notice and Tax Number Service

2013 Service for corporate income tax filing

2009 E-service for tax recipients (local and central government, other organisations)

1997 Digitising paperform periodic tax returns - monthly tax returns

1998 Tax.fi (redesigned in 2011)

2008 Tax Return on the Web

2014 Complete overhaul of tax systems, the Valmis program

2007 Tax Card Online

2001 BIS information service (YTJ) - registration details of companies)

2014 E-filing real estate tax information

2014 E-invoices

2014 Tax gap register

2015 Chat service channel

2006 Palkka.fi

2003 Digitising paperform annual information returns

2005 Ilmoitin.fi - Company interface service

2006 Tunnistus.fi and Katso identification service - identification and authorisation services for businesses

Services for businesses Services for individuals Services for individuals ja businesses

47

FINNISH TAX ADMINISTRATION 2015

AWARDS FOR THE DEVELOPMENT OF E-SERVICES Digital Project of the Year award to Tax Card Online (in Finnish and Swedish)

Digital Organization of the Year award to the Tax Administration

Influencer of the Year award to Information Management Director Markku Heikura for the development of digital services

46,000 th 17,000,000 15,000

7

The

An average of

most esteemed website in Finland

An average of

THE TAX ADMINISTRATION ON SOCIAL MEDIA In 2015, the Tax Administration opened new accounts on Facebook, Instagram, Snapchat and Twitter. The social media updates reached more than half a million people monthly.

Award for Influential Organisation of the Year

Service of the Year award to the Tax Administration’s Snapchat

88%

TAX.FI

visitors a day visitors in 2015 chat conversations a month

THE TAX24 ONLINE CUSTOMER SERVICE The online customer guidance concept Tax24 introduced in 2015 includes three interactive platforms: the Chat, the Answer Bank and Submit a question. Tax24 reduces the need for customers to visit the tax office or call service numbers.

videos on YouTube

views

of monthly employer contributions are filed electronically

76%

of limited companies filed their income tax return electronically 2011, the share of 32%

e-filing was

10,000 90%

customers received help with e-filing their tax returns

In Tax Return on the Web almost

81%

in

Explore the service

45 30,000

of monthly VAT notices are filed online

of contacts were by chat

51%

of tax card revisions are done electronically in

2011, the share of 37%

e-filing was

48

FINNISH TAX ADMINISTRATION 2015

The term grey economy signifies the neglect of statutory payments and liabilities. Tax audits, campaigns as well as customer guidance and supervision are used for combating the grey economy. The goal of the actions is to keep society’s tax income at the correct level and to prevent the competitive edge of companies that operate illegally.

The yearly publication of the Tax Administration’s Grey Economy Information Unit gives an overview of how grey economy is combated and how society can be protected from it. The 2015 publication introduces the City of Helsinki and the Finnish Funding Agency for Innovation, Tekes, as the Tax Administration’s allies in the combat against grey economy.

Read The Grey Economy 2015

TAX ADMINISTRATION SERVICE WORKS WELL AND THE INCIDENCE OF GREY ECONOMY IS DECLINING

INCREASED NUMBER OF TAX AUDITS AND GREY ECONOMY INVESTIGATIONS

A questionnaire carried out with corporate taxpayers shows fewer observations of grey economy than in previous years. The taxpayers are furthermore very content with the service provided by the Tax Administration. Especially tax audits were evaluated in positive terms. On the downside, people feel that the Finnish tax system does not encourage entrepreneurship.

The Tax Administration carried out more than 4,500 tax audits in 2014 and 2015. This is an increase of around 1,000 audits compared to previous years. The increased numbers are explained by an emphasis on risk-based auditing and real-time audits, where the goal is to make taxpayers correct their erroneous actions by themselves.

31 per cent of tax audit working hours were spent on investigations into the grey economy.

Out of the 4,589 tax audits finalised, various forms of grey economy were observed in 1,041 audit objects (23 per cent).

READ MORE

(in Finnish and Swedish)

A RECORD NUMBER OF FINANCIAL CRIMES KNOWN TO THE AUTHORITIES The publication The Grey Economy — Control statistics 2015 presents the results of the Tax Administrations audit work, the numbers of financial crimes dealt with by the Police and Customs Finland as well as statistics on alcohol control. The statistics show that in particular the numbers of cases of aggravated dishonesty by a debtor and aggravated tax fraud were considerably higher in 2015, in comparison to previous years.

Read The Grey Economy — Control statistics 2015

GRANSKNINGAR AV GRÅ EKONOMI Tax audits Number of audited businesses found to be grey

2013 2014 2015 3,362 4,666 4,589 688

713 1,041

49

FINNISH TAX ADMINISTRATION 2015

COLLABORATION WITH SEVERAL ORGANISATIONS

In 2015, the Tax Administration actively took part in the work of the OECD, the IOTA and the EU, and furthermore in Nordic cooperation.

We also started collaborating with ATAF (African Tax Administration Forum). The purpose of the cooperation is to support the development of the taxation units of large corporations in Namibia.

In order to secure Finnish tax income, the project Risk Phenomena in International Taxation has been ongoing at the Tax Administration. The purpose of the project is to decrease the tax gap arising from international phenomena and to identify, prevent and reduce tax risks related to them. It also aims at enhancing national and international cooperation.

NEW INTERNATIONAL DATA FLOWS

MUCH INTEREST FOR CONFERENCE

International data flows support development of tax systems

Much interest for conference on international exchange of tax information

 In late 2015, the project New International Data Flows was introduced. The project will carry out numerous automation procedures for international exchange of information. These include DAC, CRS and CbC. Exchange of income information in accordance with the EU directive on mutual assistance has already begun. The Tax Administration has developed its procedures in order to incorporate the received information to its own tax processes. Finland signed the FATCA agreement regarding the exchange of tax information with the United States in 2014. The Tax Administration implements the agreement by supervising the reporting obligations of Finnish financial institutions and by exchanging information between countries.

 In September 2015, the Tax Administration arranged a meeting for the managers of tax information exchange in EU member states. The aim of the Tax Administration is to minimise the tax gap by enhancing international information exchange and making use of the information received. The meeting had participants from 28 countries, both from the European Commission and from the OECD. Meeting of EU information exchange managers

50

FINNISH TAX ADMINISTRATION 2015

Finnish citizens traditionally have positive attitudes towards tax compliance, and tax morale is high. This did not change in 2015. The task of the Tax Administration is to ensure that its customers pay the right amount of taxes which is used to maintain and develop public services. The generation of tax revenues is not only supported by an effective payment control but also by easy-to-use services and the promotion of a positive attitude towards taxes. Â We make every effort to ensure that our customers can pay their taxes as easily as possible. Proactive guidance and electronic filing are always available. We serve many different kinds of customers and are able to focus proactive guidance on the right target groups.

95% 75%

of Finns consider paying taxes the duty of every citizen

Customer Satisfaction survey 2015

of Finns say they get value for their tax money

TAX REVENUE: WHO PAYS, WHO GETS IT, AND HOW IT IS USED

5% SAFETY

8%

WHAT TAXES ARE USED FOR

4%

INFRASTRUCTURE, CULTURE, ENVIRONMENT

BUSINESS SECTOR

11%

EDUCATION WHO GETS THE MONEY

52% STATE

2%

PARISHES

14%

6.5%

43%

SOCIAL SECURITY

39.5% MUNICIPALITIES

KELA*

ADMINISTRATION HOW THE MONEY COMES IN

15%

HEALTH CARE

55% INCOME TAX 26% VAT 11% OTHER TAXES CORPORATE 8% INCOME TAX INDIVIDUAL

WHO PAYS

85% INDIVIDUALS

15% CORPORATIONS

The Finnish Tax Administration PO Box 500, 00052 VERO www.tax.fi