Expert argues proposed amendment to Act on Mutual Funds may turn Finland into tax haven

Watchdog project VIRKE claims proposals merely pander to wishes of banking lobbyists and the market

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The amendment to the Act on Common Funds (Mutual Funds) that is currently in preparation may lead to Finland turning into a tax haven, argues project manager Janne Marttinen, leader of the authorities' cooperation development project VIRKE.
      VIRKE is an intensified cooperative undertaking between the Ministry of Finance, the tax authorities, the Police, the Customs, and the recovery administration, the aim of which is to clamp down on the grey economy and white-collar crime.
     
Currently there are two separate pending legislation projects with regard to Finland's Act on Common Funds. The first deals with investors’ administrative registration for their investment fund shares, and the second one with special investment funds.
      According to the Ministry of Finance, the aim of the amendment is to strengthen the competitiveness of Finnish open-ended mutual funds. The Ministry’s intention is to attract more foreign investors to buy shares in the funds.
     
So far, however, VIRKE has adopted a sceptical stand with regard to the preparation of the amendment.
      According to its statement, the proposed amendment’s worst shortcomings relate to sanctions and powers of the authorities. These are seen as inadequate.
      “The suggested amendment to the Act on Common Funds threatens to turn into a ‘Tax Haven Act’ if there are not safeguards that the supervising authorities will have smooth access to the information they need with regard to the real owners of the investment fund shares and that they can also verify the authenticity of the received information”, the statement reads.
      According to VIRKE, if it is implemented the amendment may contribute to the increase of arrangements related to tax evasion, tax crime, and money laundering.
     
In Marttinen’s view the suggested amendment’s basic problem is that as a starting-point it only takes into account the friendly changes to the existing legislation hoped for by the market.
      “The lawmakers have set out to fulfil the demands put forward by the financial market”, says Marttinen.
      Marttinen points out that tax haven arrangements are commonly seen as one of the causes of the present economic crisis.
      “The global tendency is to dismantle tax haven legislation and increase transparency. The Finnish lawmakers are about to take several steps into the opposite direction.”


Previously in HS International Edition:
  Mutual funds fleeing from Sweden to Finland and from Finland to Luxembourg (4.12.2007)

Links:
  KPMG: Finland Regulation - Funds and Fund Management 2009 (.pdf file)

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