Detection and prevention of illegal activities in the taxi business, Sweden

About

Country: 
Sweden
Sectors: 
Transport and storage
Target Groups: 
workers/suppliersemployers/purchasers

Over a three-year period, the National Tax Agency organised an extensive project seeking to identify and prevent illegal behaviour within the taxi business (Skatteverkets kontroll av taxibranschen). The efforts were aimed at tax evasion and undeclared work. As the project drew to a close, the National Tax Agency considered that the efforts had paid off and a substantial amount of previously undeclared activity had been exposed.

Background

Since 2003, the Swedish government has acknowledged the problem of tax evasion and undeclared work within the taxi business. In 2005, the government presented a proposal on measures to tackle the situation. The proposal (2005/06:109) suggested the following provisions:

  • changes in the Professional Transport Act (1998:490);
  • a prohibition against unauthorised persons transporting people for compensation. Violations should be punished with a fine;
  • a specific driving test for those who apply for a taxi driver authorisation.

The National Tax Agency (Skatteverket) estimates that the turnover of tax fraud within the taxi business each year amounts to SEK 2 billion (€189 million, as at 30 January 2009). The problem of undeclared work and tax fraud is most common in the southern cities of Stockholm, Gothenburg and Malmö – the three largest cities in Sweden.

A key reason for initiating the project was concern over the increased illegal behaviour spreading in the taxi business. According to the National Project Manager at the National Tax Agency, Håkan Asplund, legitimate companies have to be given a chance to compete on equal terms. The Swedish Association of Taxi Owners (Svenska Taxiförbundet) welcomed the project and agreed with the National Tax Agency that undeclared work is a major problem in the business.

Besides the National Tax Agency and the Swedish Association of Taxi Owners, the other main actors involved in the initiative were the:

  • Swedish Police Service (Polisen), which has assisted the National Tax Agency in detecting unauthorised drivers in the field;
  • County Administrative Board (Länsstyrelserna), which is responsible for authorising taxi drivers;
  • Swedish Economic Crimes Authority (Ekobrottsmyndigheten), which works with the more serious cases of tax fraud.

Objectives

The main objective of the project was to detect and prevent illegal behaviour within the taxi business. It is important to ensure a fair balance in competition for legitimate companies.

Specific measures

The National Tax Agency investigated each taxi company by either sending them an enquiry, or by investigating the taxi drivers’ accounts on location with assistance from the Police Service.

Long-term measures included providing the companies with information on book-keeping, as well as preventive efforts by raising awareness among large clients of taxi services. The National Tax Agency also tries to guide legislation in the field.

Evaluation and outcome

Achievement of objectives

According to the National Tax Agency, the objectives have been largely achieved. After three years of intense detection work, the agency has perceived an improvement in the situation. Between 2005 and 2007, the practice of cheating on taxes and wages decreased by 50% in large taxi companies.

The easiest and most effective way to check a taxi business is to enquire with the National Tax Agency whether they have reported their taxes correctly. Some 8,500 such enquiries were made in the first eight months of 2008 in the Stockholm region alone, which shows that there is great interest in hiring legal and trustworthy businesses. In the same time period, the National Tax Agency identified 649 taxi drivers who did not declare their taxes properly. The agency has also received a considerable amount of corrected declarations, which indicates that fewer companies are trying to withhold information about their taxes and the number of employees.

Obstacles and problems

It has been problematic to detect undeclared incomes in smaller companies, especially those which consist of only one car and do not cooperate with a dispatch office.

Lessons learnt

The project lasted for three years and the detection work will no longer be continued to the same extent. Mr Asplund states that the National Tax Agency is satisfied with the results and that they have detected a substantial number of cases of undeclared work. The most difficult part of the process has been to detect undeclared work within small businesses and among self-employed taxi drivers. It is much easier to detect irregularities if the company or driver is connected to a large dispatch office where all of their activity is registered.

Impact indicators

The taxi business in Sweden consists of 7,600 companies and about 15,000 cars registered in the 21 County Administrative Boards. Annual turnover of the formal part of the taxi business is SEK 12 billion (€1.1 billion), while the undeclared revenue is estimated at SEK 2 billion (€189 million) annually.

In October 2008, towards the end of the project, the total number of investigated taxi companies amounted to 1,700 enterprises and the number of drivers was 1,000 persons. Detected undeclared turnover in total stood at SEK 425 million (€40 million), and the equivalent figure for undeclared wages was SEK 235 million (€22 million). Tax income resulting from detection has increased by SEK 241 million (€23 million).

A total of 35 employees in the National Tax Agency were involved in the project. The investigation led to 482 police charges and 374 charges to the County Administrative Boards.

Transferability

If taxi businesses in other countries are using the same system with dispatch offices as used in Sweden, Mr Asplund believes that it would be possible to perform the same detection work abroad.

A feature of the taxi business that makes it easy to investigate is the fact that, typically, all activities are registered in the taximeter in the car. A routine investigation consists of printing from the taximeter and then comparing it to the data in the tax declaration. If other sectors use a similar system – for example, cash registers in the retail sector – it would be easy to apply the system to detect undeclared work in that sector of economic activity as well.

Contacts

Main organisations responsible:

Bibliography

Åtgärder mot svarttaxi m.m., Government proposal (Regeringens proposition) 2005/06:109, Stockholm, 2004, available online at: http://www.regeringen.se/content/1/c6/05/87/21/7f205d39.pdf.

Ekonomisk brottslighet inom taxinäringen, Swedish government official reports (Statens offentliga utredningar, SOU) 2004:102, Stockholm, 2004, available online at: http://www.regeringen.se/content/1/c6/03/30/24/beb05aec.pdf.

Thomas Brunk, Oxford Research

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