The Finnish Tax Administration’s lead counsel Matti Merisalo confirmed that authorities received dozens of requests to correct tax data. Authorities are now considering what kinds of penalties to apply to these individuals for not declaring additional income.

For the most part the declarations comprise interest income ranging from a few thousand euros to tens of thousands of euros per person. An individual would have to have deposits of nearly one million euros to earn tens of thousands of euros in interest.

 “The income would certainly be taxed. In addition we will consider other sanctions. We might perhaps impose higher taxes, or if the matter is serious enough, we may file a criminal complaint,” Merisalo said during Yle’s A-Studio programme Monday night.

So far though tax officials haven’t informed police about Finns who’ve stashed their assets abroad in Swiss banks without declaring interest income. Along with the new tax declarations they are also reviewing the explanations provided by their customers.

“In some of the cases people claim to have forgotten. We will have to critically examine these claims since it will determine whether or not we impose a higher tax rate. Keeping wealth offshore usually involves a deliberate choice and doesn’t necessarily have anything to do with forgetfulness,” Merisalo commented.

Switzerland to crack open bank secrecy

Wealthy Finns may have been prompted to turn themselves in to Finnish tax authorities as Swiss banks update their operations to fulfill tighter global financial regulations. Timo Torkkel, tax services head of auditors KPMG said that leading Swiss banks Credit Suisse and UBS have circulated a letter to clients asking them to agree to declare their assets to Swiss tax officials. Customers are required to sign the letters as a sign of compliance.

The deadline to return the signed UBS letter was end of June, which could explain why Finnish tax officials received dozens of tax correction requests. According to Torkkel if customers did not agree to divulge the required information the bank would convert the customer’s assets to cash and transfer it to another account in a bank of their choice.

The KPMG tax chief said that the Finnish assets stored in Swiss banks are mainly ban deposits, bonds, mutual fund shares and gold. Customers are currently under pressure to decide what to do with their assets since Swiss banks will hand over customer information to tax authorities for the first time next January.

Conciliatory programme could pre-empt criminal proceedings

Finland’s Ministry of Finance is currently preparing regulations aimed at punishing persons found guilty of engaging in tax evasion. However one option would be to adopt a conciliatory programme that allows tax evaders to declare their true wealth and return it to Finland, thus avoiding criminal proceedings.

However such individuals would still be subject to sanctions such as additional taxation. Critics of tax havens have argued that the national economy thrives when people making use of tax havens pay outstanding taxes and return offshore wealth for investment and consumption.

The cabinet is also reviewing a report on conciliatory measures prepared by the Finance Ministry under the leadership of Minister Antti Rinne.

Antero Toivainen, as senior Finance Ministry official said that it would be difficult for Finland to adopt a system that does not include punitive sanctions.

“Although there is no additional tax sanction in Sweden and Norway, the report is based on the general taxation model which involves at least administrative sanctions. A tax penalty could be that sanction,” he added.

Danger of capital flight

MP Sampsa Kataja of Parliament’s tax unit said that there’s an urgent need for some kind of conciliatory measure for tax offenders. Otherwise the risk is that wealth will flee to non-European countries.

“The dismantling of banking secrecy in central Europe means that money will go somewhere else. Now we have to find a way to bring that money back to Finland with this kind of regulation,” he added.

Sweden has successfully repatriated about 170 million euros using this kind of measure. Kataja estimated that Finland could well bring back about 100 million euros in the same way.

MP Sirpa Paatero expressed guarded support for conciliatory measures, pointing out that OECD countries have agreed to begin automatic sharing of tax data in the next few years, which will make life more difficult for tax evaders.

“With strict conditions we might see something mildly positive. We could use a conciliatory approach during this transition phase, before information exchange comes into effect. In this way wealth won’t be transferred to places like the Virgin Islands,” Paatero concluded.