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Parliamentary ombudsman: Automated tax return processing unconstitutional

The ombudsman's ruling follows taxpayer complaints over having to pay back taxes due to incorrect decisions.

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Image: Axel Nurmio / Yle

The Finnish Tax Administration’s practice of using automated computer programmes to process income tax returns violates the constitution and does not represent "good management", according to deputy parliamentary ombudsman Maija Sakslin.

In 2018, the deputy ombudsman called on the tax authority to provide a report on the use of automation to process tax returns. That request was based on complaints filed by individual taxpayers about inaccurate decisions that required them to pay back taxes.

The tax authority has been using automation to process tax returns filed by individuals and to make decisions on tax refunds or arrears in cases where no changes to the forms were required.

According to Sakslin, the problem turns on the fact that there is no legislation to regulate automation or that would safeguard customers' legal protections. She also called for a report on possible new regulations that might be required.

Tax administration director general Markku Heikura said the deputy ombudsman’s ruling came as a surprise to him, especially since the automated processing of personal income tax returns began as far back as 2005 -- 2007 and legal issues were weighed at the time.

"This is certainly a huge surprise," Heikura told Yle in response to the deputy ombudsman’s ruling.

The tax authority chief said that the agency had been able to reduce payroll costs by about 2,000 person-years by introducing automated processes. He added that the authority cannot afford to pay for human effort to do the same amount of work.

"This has resulted in significant cost savings and at the same time accelerated the speed of tax decisions," he added.

Names behind tax decisions?

Sakslin’s lengthy ruling was published on Tuesday but Heikura received an advance copy. He said that the problem might be due to the fact that current legislation does not refer to tax rulings based on automated processes.

However he said that the deputy ombudsman’s decision doesn’t necessarily mean that the authority should stop using automation.

“We must now analyse what this will mean in practice, but my understanding is that one solution would be to amend legislation to include automated processing of mass data," he suggested.

Heikura said that the idea of completely prohibiting automation for processing tax returns is unthinkable. He also stressed that the process does not involve artificial intelligence.

"We use automation, which is not influenced by any algorithm. Rather it is fed with certain parameters. This enhances the equal treatment of taxpayers," he pointed out.

He said he was also perplexed by the fact that the tax authority’s working methods had been reviewed in the context of other legislation "and there had never been any comments". The first time the authority came under scrutiny in this manner was in 1992.

"Perhaps the aim here is to ensure that there is someone’s name behind any decision," he speculated.

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