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Small businesses, experts slam "stressful" Incomes Register

Entrepreneurs and accountants say the Tax Administration's new database outsources government work for free.

Tulorekisterin tiedontuottajiksi ja digitaalimaailmaan pakotetut mikroyritykset ja tilitoimistot ovat ahdistuneet tulorekisterin asettamista vaatimuksista.
Small businesses say they are hurting under the new Incomes Register law. Image: Mari Nupponen / Yle

Experts and entrepreneurs increasingly say that small businesses are having their feet held to the fire by the Tax Administration's new Incomes Register database.

The centralised register contains comprehensive information on the wages, pensions and benefits of individuals in Finland. Its stated purpose is to combat the grey economy through transparency and to improve access to important data through digital automation.

However, financial management veterans are saying it is the Tax Administration and the insurance companies that are reaping the real benefits of the law change.

Since being instated in January, the database has reportedly caused stress and extra labour for firms with less than 10 employees and solo entrepreneurs, which together account for some 95 percent of Finland's businesses.

Automation requires labour

Industrial management researcher Pekka Leviäkangas from the University of Oulu said that transferring labour downwards from large companies and organisations could technically improve productivity, but that poor-quality data and incorrect decision-making are high risks.

"Sudden new requirements lead to small businesses being stressed out by the registry law's requirements," Leviäkangas said.

The preparatory work needed to get various databases and programmes operating efficiently prior to automation is not accounted for in the new law, causing businesses to put in the labour without recompense.

"This new form of labour transfer is possible because of Finland's cutting-edge digitalisation and high level of education," Leviäkangas added.

CEO Niklas Sonkin of Finland's largest accounting firm Accountor said that large companies could get the Incomes Register working for them in due time; however, that point had not been crossed in late March, and small businesses are still suffering, he said.

"Decades-old customs have to be overhauled overnight. There will be more costs than benefits," said Sonkin, adding that he hoped the bureaucrats who designed the new system would revisit their work.

Advance pay harder to get

One of the concrete downsides to the new law that many employees have noted is that applying for and receiving advance pay on one's salary has become more difficult.

Until January, employees in Finland could receive a small advance payment on their monthly salary by request alone; the sum was deducted from the employee's next paycheck, along with its income tax.

However, now the Tax Administration requires that every single payment be reported separately within five days of the actual transaction, instead of once a year as before.

"This is a misinterpretation of the law," said retired business management trainer Lassi Mäkinen. "It has increased the work and information load [of small companies] by staggering amounts, while the organisations get easier access."

Many companies have in fact stopped paying out advance salaries to their employees due to the added workload. Accountor's CEO Sonkin said this is an attitude problem as well as a real challenge for some workers.

"Families that rely on advance payments each month may find themselves turning to quick loan solutions. It's arrogant for the taxman to effectively shut down this custom and tell low-income earners to buck up," Sonkin said.

Taxman not-so-adamant

These and other criticisms have not shaken Finland's Tax Administration, whose Incomes Register chief Terhi Holmström defended the system and the five-day reporting requirement.

"Different rules are hard to remember. It's easier for the payer if the five-day rule applies to all payments," Holmström said.

According to management veteran Mäkinen, the new tax register also defines a company's payday incorrectly as "the day the money may be used" instead of the day the money leaves the employer's bank account.

The Tax Administration's immoveable stance on the new registry law cracked in mid-March when project manager Arto Leinonen said the government was "surprised by the problems" in the system and would have to improve its service during 2019.

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