A new poll suggests that Finns are largely law abiding when it comes to paying taxes – at least according to what they are prepared to admit to others.
The survey, carried out by Taloustutkimus and commissioned by Yle, asked working-age Finnish residents whether they have ever ”paid or received undeclared salary in return for work.”
15 percent of respondents said they have at some point either received or paid undeclared salary, while three percent said they do so at least once a year.
By keeping payments hidden from the tax authorities, a person or company would avoid having to pay not only tax but also national insurance and pension contributions.
Not too gloomy
Tax adviser and grey-economy specialist Markku Hirvonen said the result is a positive reflection of Finnish obedience to law. ”In the light of these results at least, you could say the situation doesn’t look too gloomy,” he said, adding that he believes that pervasive social morality and Finland’s system of tax credits reduce the desire for people to carry out cash-in-hand work.
”Tax credits have brought cleaning and construction jobs into the tax system. They were previously the main cash-in-hand areas,” Hirvonen said.
A strong sense of moral duty comes from the belief held by many Finns that they get to experience benefits from their tax money, he said.
”Cash-in-hand work is clearly more widespread in societies where social morals have collapsed or there’s no trust in the system,” Hirvonen said. “People in Ukraine and Greece, for instance, don’t believe they see the fruits of their tax money.”
However, surveys regarding the grey economy are inherently problematic, as they rely on respondents telling the truth.
“The European Commission has run studies in the past where the results showed that the Danes and the Dutch were the most likely to work cash-in-hand, and those in Southern Europe the least.”
Hirvonen points out that firms who benefit the most from not declaring salaries are the least likely to admit to doing so.
Hirvonen has previously estimated that Finland lost between four and six billion euros to the grey economy in 2008.
When broken down by gender, 19 percent of male respondents admitted to at some point having kept salary secret from the authorities, compared to 11 percent of women.
Hirvonen said that in Nordic countries, cash-in-hand work is often connected to the male-dominated construction industry.
Previous studies have suggested that the so-called grey economy is more prevalent among lower paid workers, which includes low-earning students or part-time workers.
A randomised sample of 1,006 people, aged 15 to 79, were interviewed by phone for the poll between 27th of June and 5th of July this year. The margin of error is 2.5 percentage points.