The goverment’s bill to expand the tax management’s access to data is facing a headwind.
In practice, the bill would give the taxman broad access to bank account information for audits. We are talking about comparative information, that is, the taxman could check the suspicion of fraud by comparing the reported information with the account information.
The tax authority has already carried out similar inspections in the past, but the GDPR regulation that entered into force in 2018 made it too difficult to request information.
EUR 100 million more for the state
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The government has estimated that the amendment of the law would bring 100 million more euros into the state coffers. According to it, the presentation is part of the fight against the gray economy and financial crime. according to the proposal, the currently valid data protection regulation regarding comparison data audits does not enable access to sufficient information from the point of view of tax supervision.
The Constitution Committee discussed the motion in November and found several in it unconstitutional items.
The proposal has now progressed to the finance committee, wich can try to amend the law or return it back to the government for preparation.
Voutilainen: The tax administration is breaking the law
Professor of Public Law at the University of Eastern finland Tomi Voutilainen considers the bill exceptionally poorly prepared. He was one of the experts consulted by the Constitutional Law Committee.
- The government’s proposal received a rare amount of constitutional law attention from the Constitutional Law Committee.
In addition, Voutilainen points out that the tax administration’s previous procedure for comparison data checks was not in accordance with the law.
[Image of Tomi Voutilainen with caption: According to public law professor Tomi Voutilainen, there are still many issues related to the tax administration’s access to information rights before it can be approved as law.]
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Banks fear detailed scrutiny of citizens’ finances – and a surge in cash use
The proposed regulation allowing the Tax Administration to access extensive bank data is sparking concern within the financial sector. Banks argue the plan puts them in a difficult position, perhaps forcing them to violate either tax laws or stringent data protection regulations.
According to Finanssiala ry’s leading tax expert, Marja Blomqvist, the large-scale disclosure of data could lead to increased cash usage and a rise in the popularity of online banks operating outside the European Union. She emphasizes that the public sector, including the Tax Administration, is currently exempt from the data protection regulation’s sanctions, meaning the burden would fall solely on banks.
The change would permit the Tax Administration to process significant amounts of personal data deemed unnecessary for tax supervision. Blomqvist points out that Finns currently use relatively little cash, meaning the tax authority would gain a remarkably detailed insight into citizens’ private lives through bank information. this could include sensitive details about health, religion, or even political affiliations.
Furthermore, Blomqvist highlights the considerable progress costs banks would incur to collect this data, costs ultimately borne by both the banks and their customers.
The tax Administration, however, appears surprised by the intensity of the reaction. Director general of the Tax Administration…
Finland’s tax administration is currently reviewing data related to virtual currency income received from abroad to ensure accurate tax declarations. According to Marko Myllyniemi, Director General of the taxation unit, the tax authority is unable to proactively identify those who have already declared such income, relying instead on comparative data audits to uncover discrepancies. The process currently relies on specialized personnel rather than artificial intelligence (AI) due to data protection considerations, though AI applications may be explored in the future.
Comparative Information Audits and Data Review
The Finnish tax authority utilizes comparative information audits, a process involving the collection of data from a broad range of taxpayers – including those who have correctly reported their income – to identify potential risk areas. This approach allows the authority to cross-reference information and pinpoint inconsistencies.
“We cannot know in advance who, for example, who has received virtual currency income from abroad, has declared their income and who has not. We only find out after we compare the data,” Myllyniemi stated, as reported by Yle.
Data Protection and the use of AI
Currently, the review of this data is conducted by specialized personnel. While AI could potentially streamline the process, it’s implementation is currently restricted due to data protection regulations. The tax authority is mindful of privacy concerns and is proceeding cautiously with the integration of AI technologies. However, Myllyniemi indicated that the possibility of utilizing AI in the future is being considered.
Implications for Taxpayers
This audit process means that even taxpayers who have accurately reported their virtual currency income may be contacted as part of the data gathering process.Though, those who have complied with tax regulations will not face any penalties based on the findings of the comparative audit.
The focus of these audits is to ensure compliance with tax laws related to income earned from virtual currencies, a growing area of financial activity that presents unique challenges for tax authorities globally. The Finnish tax authority’s approach reflects a broader trend among governments to increase scrutiny of digital asset transactions and ensure fair tax collection.
Source:
* Yle: Finland’s tax administration reviews virtual currency income data