Financial Crimes Take a Sizable Bite out of Finland’s Economy

Overview of Financial Crimes in Finland

Financial crimes continue to pose a significant challenge to Finland’s economy, resulting in substantial financial losses. according to the Finnish Tax Administration, the total value of unreported sales in the grey economy decreased to approximately €10 billion in 2021. This figure still represents a substantial financial loss for the country.

The Extent of the Grey Economy

The grey economy, which includes off-the-books business transactions and unreported income, accounted for an estimated 5.8% of Finland’s Gross Domestic Product (GDP) in 2021. This figure is a decrease from the previous year but remains a cause for concern due to the long-term economic impact of unreported economic activity.

Major Industries Affected

Most grey economy transactions occurred in the construction and service industries. In these sectors, unreported sales accounted for approximately 27% and 23% of sales, respectively [1](# footnote1).

Impact of Tax Evasion

The tax administration recorded approximately €1.9 billion in tax evaded income in 2021. tax evasion resulted in substantial losses in corporate income tax, personal income tax, and value-added tax (VAT) [2](# footnote2).

Consequences of Financial Crimes

Financial crimes have far-reaching consequences that go beyond lost revenue. The shadow economy distorts the competitive landscape by enabling unscrupulous businesses to undercut honest competitors by avoiding taxes and labor regulations. Additionally, it can lead to a loss of confidence in government institutions and a negative perception of the business climate, deterring foreign investment and hindering economic growth.

Government Initiatives to Combat Financial Crimes

To combat the grey economy and curb financial crimes, the Finnish government has launched several initiatives, including increased enforcement efforts, collaboration with stakeholders, and the promotion of digitalization and electronic invoicing to make transactions more transparent [3](# footnote3). Furthermore, the Finnish government has expressed its commitment to implementing EU regulations on tax transparency and the exchange of information between countries to crack down on tax evasion and other financial crimes.

The Road Ahead

Despite these measures, Finland continues to face an uphill battle against financial crimes. The success of these efforts hinges on the cooperation of businesses, individuals, and government entities to foster an environment of transparency, accountability, and fair competition. With the economy facing numerous challenges and the need to fund public services, it is essential to address these financial crimes head-on to ensure a sustainable and fair economic climate for all.

References

1. Finnish Tax Administration, Press Release: “Grey economic transactions in Finland – statistical data 2021.” Accessed January 19, 2023. https://www.vero.fi/en/news/grey-economic-transactions-finland-statistical-data-2021.
2. Finnish Tax Administration, Press Release: “Tax evasion in Finland – statistical data 2021.” Accessed January 19, 2023. https://www.vero.fi/en/news/tax-evasion-finland-statistical-data-2021.
3. Finnish Ministry of Finance, “Combating the Grey Economy and Tax Evasion.” Accessed January 19, 2023. https://www.finance.fi/en/topics/combating-grey-economy-and-tax-evasion/.

[1]: Finnish Tax Administration, Press Release: “Grey economic transactions in Finland – statistical data 2021.” [2]: Finnish Tax Administration, Press Release: “Tax evasion in Finland – statistical data 2021.” [3]: Finnish Ministry of Finance, “Combating the Grey Economy and Tax Evasion.”