Grey economy can be tackled by preventing tax evasion and bringing in tax numbers in the facility services sector

In a joint announcement on 23 September, PAM and the Finnish Hospitality Association MaRa call on the Finnish government to urgently bring in online point-of-sale systems to prevent tax avoidance.

Developing taxation by legislative and technological means is an effective way to prevent the grey economy. Moving to fiscal point-of-sale systems would improve the tax authorities’ position and significantly reduce the possibilities for falsified taxation and the destruction of accounting records. It would also improve the economy, promote fair competition between companies and improve the position of workers.

“Often companies that engage in tax evasion also present many other problems with working conditions. That’s why action must be taken on the openings for the grey economy, for example sales bypassing point-of-sales systems. As well as undeclared sales, crackdowns by the authorities have revealed exploitative employment discrimination and undeclared labour”, says Annika Rönni-Sällinen, President of Service Union United PAM.

The tax authorities have looked into introducing fiscal point-of-sales systems, for example, as part of combating the grey economy. Cash sales are more common in the hospitality sector and the hairdressing and beauty sectors than in other sectors. The downside of cash sales is that it makes bypassing point-of—sales systems easier than other sales methods.

PAM and MaRa are in favour of bringing in online point-of-sales systems. The organisations agree that the phase-in period should be long enough so that companies of different sizes have the chance to make the changes as they update their ordinary point-of-sales systems and thereby minimise the costs to operators of the new obligation.

Tax numbers are another way to combat the grey economy and undeclared labour 

PAM and Real Estate Employers are jointly demanding that tax numbers, which are mandatory in the construction sector, should be extended to the facility services sector. The facility services sector includes cleaning, building services, maintenance of outdoor areas, energy management and technical services and various services for premises and users.

“Together with PAM, we have been calling for legislation on tax numbers to be extended to the sector ever since 2012, but unfortunately it has got nowhere in government”, says Real Estate Employers’ CEO Pia Gramén.

“Customer awareness is a key factor in sourcing responsibly produced services. Customers are already in a position to effectively combat the grey economy. For example, Senate Properties has various contractual conditions to prevent financial fraud that it requires its contractual partners to commit to”, says PAM President Annika Rönni-Sällinen.

“Labour market cooperation and self-monitoring by companies are not enough by themselves to reach the objectives; official monitoring and legislation are also needed as in other areas to combat the grey economy. If they want, law makers can secure a level playing field for companies and fair treatment for workers”, Rönni-Sällinen continues.

The private facility services sector employs over 90,000 persons in Finland, and around 80 per cent of them work in member companies of Real Estate Employers. The number of employees with a foreign background has been constantly increasing, especially in the capital city region. The share of works with a foreign background is around 20 per cent nationally, and almost 50 per cent in the capital city region.

All payroll employees already have a tax number on their tax card. Foreign employees get a tax number and personal identity code from the tax office. The main practical benefit of tax numbers in tackling the grey economy comes from foreign employees’ “registration obligation” to obtain a tax number.

Real Estate Employers and PAM stress that dishonest companies have an unfair competitive advantage compared to law-abiding companies, and the bill is footed by other companies in the sector – and ultimately by society and ordinary taxpayers.

The European Labour Authority has together with its member states launched in 2020 an Undeclared Work Communication campaign, which will share information on measures to combat grey economy and why it is in everyone's interest to do work formally.  #EU4FairWork