Authorities cracking down on tax evasion by associations and foundations
Tax-free status of non-profit groups reassessed
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The National Board of Taxation started a three-year crackdown at the beginning of this year on suspected taxation violations committed by associations and foundations.
Nearly all of Finland's nearly 130,000 associations and foundations enjoy tax-free status as not-for-profit organisations. Poor scrutiny of the finances of the associations has attracted shady figures who operate actual businesses activities without paying taxes, under the guise of working for the common good.
The Pori Jazz Festival has come under the spotlight. The association which runs the festival is set to lose its tax privileges. Taxation was imposed on the Provinssirock festival already a few years ago.
"The purpose of the project is to find out how much money is moving in this field, and if the sum is so big that it is worth spending ammunition on it", says Tuomo Karvonen of the National Board of Taxation.
Dozens of inspections have been conducted, and up to 30 are still incomplete. The investigation has revealed that some associations operate on a tax-free basis, while engaging in business that should be taxed. "Nothing dramatic has come out yet", Karvonen says.
The Uusimaa Employment and Economic Development Centre is currently investigating the use of employment subsidies paid to several associations. Markku Uusitalo, head of the centre, says that in many cases, associations have failed to pay employer contributions and taxes. A few cases have come under police investigation.
He adds that in many cases, the violations occur out of ignorance.
Associations and foundations have now been taken under the eye of a national economic crime programme.
"Enforcement has long been scattered and weak. This is a broad area, which is difficult to get a grip on. Associations and foundations nevertheless pay great amounts of wages and receive public subsidies", says Markku Hirvonen, head of a development project aimed at developing cooperation among officials.
Hirvonen says that it is possible to engage in shady business for years under the guise of an association before tax authorities get wind of what is going on. "Associations do not have the same kinds of obligations to report on their dealings as companies do."
Inspections have revealed cases in which the yield of what is supposed to be a charity drive is actually pocketed by the organiser.
The founders of an association themselves define whether or not is that of a non-profit organisation. Submitting tax declarations is at the discretion of the association itself.
Tax authorities usually do not take issue with the activities until fund raising activities have taken on characteristics similar to that of a business.
Helsingin Sanomat
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| 29.8.2006 - TODAY |
 Authorities cracking down on tax evasion by associations and foundations |
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