Wednesday, November 02, 2011

Finland publishes all personal tax receipts in public

It’s that time of the year again in the Nordic nation of Finland, when the tabloids as well as the broadsheets have a heyday looking through the income and capital gains for the year 2010 of all taxpayers in the country, released this week by the Finnish Tax Authority. They are available for consultation in all offices of the Tax Authority, printed on paper, as no electronic databases are released to the public.

If you know somebody who is taxable in Finland and made more than 150,000€ you can find their tax information on several websites of major newspapers. For instance, simply by typing in their names in the Helsingin Sanomat (the main national daily in Helsinki) Tax database listing the 10,000 top earners each year. They also have personal profiles over the years, see for instance former CEO of Nokia Jorma Ollila. Would this be too intrusive for other CEO's out there? He doesn't seem to mind too much, and walks without bodyguards, and can live without high gates around his house.

Some sources give more detailed graphics such as the famous "champagne glass" effect on income inequality on the MTV3 "Tax Machine" (private TV channel) website, just type in a province in Finland (e.g. Pirkanmaa).

Talous Sanomat, an economic daily, lists the top 5000 earners based on their taxable income. You can also search top earners by profession (from lawyers, beauty queens, Big-Brother actors, to weathermen), and province. Interestingly being on the 5000th place required an income of 244,863€, which is about seven times the average income in Finland (36 386€ annually or 3032 monthly according to Statistics Finland for 2010 - the median would be much lower).

The Social Democrat party newspaper Demari looked through the database and concluded that incomes from capital gains grew 22% in 2010, while incomes from salary grew only 4.5%. It appears that this could represent a case of shifting taxable income across to capital gains, which are taxed at a lower rate than income on salary - see what Warren Buffett had to say about this situation here.

The Left Alliance newspaper Kansanuutiset tells a similar story of a widening income gap, due to the increases among the top earners, and use of stock-options and other boardroom pay incentives that shift final pay packages towards capital gains. The newspaper calls for reestablishing the ‘wealth tax’ that was abolished in 2005. During the time of the wealth tax, information was also publicly available on taxable assets held.

The Finnish NGO coalition KEPA calls for publishing all corporate tax payments, in addition to the current practice that covers only individual taxation. They conducted a public survey on whether citizens would be interested in knowing how much companies contribute in taxes, and 80% of the respondents answered positively. Such a move would become meaningful and effective with implementation of country-by-country reporting.

Tax transparency has a long history in Finland. Accounts of the practice go as far back as the 18th century municipal taxation, where tax officials had little time to verify self-declared tax forms. So they thought that neighbourly love (and jealousy) would solve the issue, by making them all public, and encouraging whistleblowing.

Tax transparency has strong support across the political spectrum from the Left Alliance to the National Coalition Party. Interesting to observe the openness and even apparent pride in contributing to the public purse, and the renowned stability and infrastucture of the country.


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