Grey Economy Information Unit, Finland
The Grey Economy Information Unit was established by law on 1 January 2011. It is a specialist unit within the tax administration department, whose brief is to gather information and conduct investigations into undeclared work and other types of undeclared economic activity. The unit was based on a previous collaborative project between various authorities.
The Grey Economy Information Unit was established by law on 1 January 2011 (number 1207/2010 and marginally 1208/2010). The legislative proposal was given to the Parliament on 1 October 2010 (number 163/2010) and the final bill passed on 7 December 2011. For 10 years prior to the adoption of the law, a collaborative project between several authorities had tried to achieve the tasks that the newly established unit was designed for. In 2006, a working group was established to prepare a legislative proposal that would make this activity permanent. The proposal was ready in 2008 and after consultations and debate it was finally delivered to the Parliament.
The Grey Economy Information Unit was set up in order to perform tasks that previously required complex cooperation between various authorities. It was determined that a single permanent unit would perform the necessary tasks more efficiently than separate organisations or even their collaboration on a temporary basis. The unit was assigned the tasks of producing reports and thereby shedding light on phenomena involving undeclared economic activity as well as investigating specific organisations and people within organisations for suspected undeclared economic activity.
The measure was to establish a permanent unit within the Tax Administration to investigate and report on undeclared economic activity. It was given the tasks of producing general reports without identifying specific actors (information gathering and dissemination task) as well as compliance reports on specific actors (organisations or individuals within organisations) at the request of other authorities (not by private parties). The unit is not involved in investigating purely private activity, i.e. unemployment benefit fraud.
The authorities that can request compliance investigations on specific organisations are defined in the enacting legislation, as are the purposes for which a compliance report can be prepared. The unit has the corresponding powers to obtain information as the authority that requests the compliance report. A compliance investigation can also be based on a general phenomenon report. The unit does not charge for the preparation of compliance reports and it is also entitled to obtain the necessary information for them free of charge. A compliance report can only be used for the requested purpose, although it can be used as a basis for another report requested by the same authority on the same object.
The Grey Economy Information Unit is authorised to keep a database, within the parameters of Data Protection Directive (95/46/EC, 1995), containing information necessary for the preparation of reports. The data controller is the Tax Administration.
The Grey Economy Information Unit operates within the Tax Administration (Ministry of Finance), but it has a network of contact people with other authorities and some of those contacts are located on the same premises as the unit itself. Important collaborating parties include the police, Customs Bureau and the Finnish Centre for Pensions as well as authorities dealing with work safety, debt recovery and bankruptcies.
Outcome of evaluations; lessons and conclusions
Achievement of objectives
As the Grey Economy Information Unit has only been recently established, its operation has not yet been formally evaluated. During 2011, its first year of operation, the unit produced 32 general reports and started 14 others. It produced 3,200 compliance reports to other authorities in 2011. Those compliance reports had mostly been completed within two working days of them being requested. As the mandate to produce compliance reports only started on 1 July 2011, the annual rate was expected to be several thousand reports.
Obstacles and problems
The unit was established because information on undeclared activity was found to be dispersed and fragmented among various authorities. Other concerns prior to the adoption of the measure were the rights of individuals and data protection.
The solution to the fragmentation problem was to establish a single unit to assist other authorities, which then can use their resources for utilising the broad-based information rather than collecting it. Rights of the individuals and data protection were taken into account by carefully specifying the actors as well as the powers that can be used. Part of this is the fact that the unit is not a decision-making body, but merely performs informational tasks. Compliance reports are confidential. General reports are designed to be public but must not contain identifiable information on people or organisations.
The Grey Economy Information Unit was established with an estimated budget of €2.5 million, but the budget for 2011, the unit’s first year, was approximately €1.6 million. The 2012 estimated budget was €1.9 million. Correspondingly, the personnel resources of the unit has been around 20 people, roughly equally divided between its two main tasks: (1) information gathering and dissemination and (2) compliance reporting. After about a year and a half of operation, the unit has completed over 40 information-gathering and dissemination tasks. It has also produced approximately 11,000 compliance reports to other authorities (this mandate started in July 2011).
The Grey Economy Information Unit has a nationwide authority; thus, application to other regions or sectors is therefore not relevant. Transferability to other Member States is relevant, but difficult to judge. The authority of the unit is naturally designed to comply with all relevant legislation, including the Data Protection Directive (95/46/EC, 1995), thereby making application in principle possible in all Member States. It is not possible to assess whether sufficient information is readily available in all Member States to perform tasks similar to the Grey Economy Information Unit.
Tax Administration, organisation structure: http://www.vero.fi/en-US/Tax_Administration/Organization(15840)
Tax Administration information page on the grey economy: http://www.vero.fi/fi-FI/Tietoa_Verohallinnosta/Harmaan_talouden_torjunta(14465)
As the Grey Economy Information Unit has operated for a short time, evaluative information on its operation is not currently available.
Harmaan talouden selvitysyksikkö (2011), ‘Harmaa talous – valvontatilastoja 2011’, Harmaan talouden tilannekuva I/2011, available at http://www.vero.fi/download/noname/%7B461CA774-ACC5-473B-B419-7CC84C599FEA%7D/5376.
Harmaan talouden selvitysyksikkö (2012), ‘Harmaa talous – valvontatilastoja 2012’, Harmaan talouden tilannekuva II/2012, available at http://www.vero.fi/download/noname/%7B3F0CE5E6-22CE-4487-8480-8E32432DBFD1%7D/7455.
Hirvonen, M., Lith, P. and Walden, R. (2010), Suomen kansainvälistyvä harmaa talous, Eduskunnan tarkastusvaliokunnan julkaisu 1/2010, Eduskunta.
OECD (2012), Effective inter-agency co-operation in fighting tax crimes and other financial crimes, 2nd Annual Forum on Tax and Crime, 14–15 June, Rome.
Työ- ja elinkeinoministeriö (2011), ‘Talousrikollisuuden ja harmaan talouden torjuminen rakennus- sekä majoitus- ja ravitsemisalalla -työryhmän mietintö’, Työ- ja elinkeinoministeriön julkaisuja, Kilpailukyky 17/2011, Ministry of Employment and the Economy.
Simo Virtanen, Finnish Institute of Occupational Health