Economic crime report 2004 - Ekobrottsmyndigheten

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A CLOSER LOOK AT UNDECLARED WORK, VAT FRAUD AND AGENTS WHO AID ECONOMIC CRIME (SPURIOUS ADVISERS AND TAX HAVENS) Undeclared Work Although available resources required that the first phase of the threat analysis focus on cash sectors, undeclared work is also a phenomenon in invoicing sectors, particularly the construction industry in its broadest sense. Logically speaking, the next phase should examine the other sectors as well. This type of crime involves withholding and failing to declare cash income, thereby affecting not only income tax assessment, but VAT and social security payments as well. One serious consequence is that companies hire undeclared labour to reduce costs and thereby become more competitive vis-à-vis legitimate businesses. The particular ways of concealing such income are highly specific to each sector. SKV is conducting a nationwide project to determine the extent to which major construction efforts throughout Sweden use undeclared labour. A report issued by the project notes that certain segments of the construction industry have incorporated tax evasion in a way that may be described as the organized contracting out of such labour. The use of various constellations of independent contractors – subcontractors, staffing companies and other intermediaries at different level – makes it more difficult for SKV to detect and investigate tax evasion schemes. The phenomenon is not new in itself. Previous reports on contracting sectors have also revealed widespread tax evasion calling for legislative changes. The current statutes on how labour is contracted out have made SKV’s job even harder when it comes to heading off this type of evasion. The project has found evidence of widespread payment of undeclared wages in the construction industry. The assessments that have been made so far suggest that such wages amount to SEK 2.5-3 billion annually in the areas covered by the project. While declining to estimate the extent of undeclared work in the industry as a whole, the report stresses that it is clearly unsettling. As the result of uncollected payroll tax, personal income tax, and VAT, the state loses annual revenue amounting to 85% of undeclared wages, or SEK 2-2.5 billion. The scope of this problem has distorted competition in some cases. 10
The proposals of a Construction Commission appointed by the Government in February 2002 are now under consideration by the Government Offices. It is important that the upcoming legislative proposals be designed so as to have a real impact on undeclared work. Otherwise, there is a clear danger that spurious segments of the construction industry, including elements of professional crime, will grow ever stronger. Since it became legal to contract out personnel, staffing companies have become active in many sectors. Some of the companies are spurious, i.e., their business concept is to provide undeclared labour. Since they hold business tax certificates, employers who use their services can deny ever having hired such workers. Trends Over the Next Three Years Attitude surveys, which are described in more detail above under “Economic Crime – Current Status and How It Has Changed,” suggest that young people today do not have the same fundamental principles and taxpayer morale as previous generations. That shift in values may pose a threat to the Swedish tax system. Unless the trend is reversed, the state is likely to lose even more tax and fee revenue in the future. Proposal • It is essential that the legislative work currently under way with respect to withholding taxes for subcontractors in the construction industry be completed as soon as possible, and that similar systems are implemented in other sectors characterized by chains of subcontractors. • When it comes to cash sectors, laws that require the introduction of type-approved cash registers are of great urgency. • Based on what SKV has learned from its special campaign, informational efforts should be carried out to reshape the lenient attitude of young people toward certain kinds of undeclared labour. • Interagency crime prevention projects have been conducted in cooperation with unions, employer organizations, trade associations, municipalities and county councils. Such activities must continue, expand and spread to other sectors that are involved. Furthermore, special initiatives are planned to increase the participation of SAMEBs and to engage local crime prevention councils in preventing undeclared work. 11
Page 1 and 2: ECONOMIC CRIME REPORT Report no. 20
Page 3 and 4: Economic Crime Report
Page 5 and 6: Government Swedish Ministry of Just
Page 7: Economic Crime and Efforts to Comba
Page 10 and 11: Economic Crime - Current Status and
Page 12 and 13: Economic Consequences of Economic C
Page 14 and 15: Interagency Cooperation Measures Th
Page 16 and 17: Undeclared Work • Employers who h
Page 20 and 21: VAT Fraud There is always a risk th
Page 22 and 23: Trends Over the Next Three Years Fo
Page 24 and 25: Concluding Remarks The purpose of t
Page 27 and 28: Contents 1. Introduction 6 2. Curre
Page 29 and 30: 10.5 NATIONAL CRIME PREVENTION PROJ
Page 31 and 32: Table 31 Number of decisions by oth
Page 33 and 34: 2. Current Status of Economic Crime
Page 35 and 36: detected offences are documented, a
Page 37 and 38: sentative of both commercial goods
Page 39 and 40: mentary evidence for verifying actu
Page 41 and 42: SKV put together documentation to l
Page 43 and 44: that a certain volume of uncollecte
Page 45 and 46: Table 3 Estimated tax error linked
Page 47 and 48: The minimum tax rates on alcohol ar
Page 49 and 50: • Businesses, such as: - Tax plan
Page 51 and 52: According to the court of appeal, t
Page 53 and 54: loan prohibition, the Accounting Ac
Page 55 and 56: 4. It has a definite focus, though
Page 57: “A number of groups are engaged i
Page 60 and 61: Council and its task force have con
Page 62 and 63: Special joint consultation groups f
Page 64 and 65: 4. Intelligence and Monitoring Oper
Page 66 and 67: The total money involved in transac
Page 68 and 69:
Intelligence Operations of Tax Crim
Page 70 and 71:
Graph 13 Number of audits, 2000-200
Page 72 and 73:
2002 to 2003. The sums involved in
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Money Laundering, etc. A newly esta
Page 76 and 77:
Since the project started on 1 Apri
Page 78 and 79:
Manipulated cash registers are the
Page 80 and 81:
professional criminals to one degre
Page 82 and 83:
official figures. In the autumn of
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ookkeeping offences continued to ac
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Graph 25b Total number of reports o
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Graph 26 Cases received, 1998-2003
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Table 30 Number of decisions by EBM
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Graph 34 Average throughput time fo
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6.5 TAX CRIME UNITS Expansion of ta
Page 96 and 97:
Graph 38 Trading prohibitions, 1998
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9. Attachment, Collection, etc. The
Page 100 and 101:
Graph 43 Unpaid taxes and fees (SEK
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Since a coordinated effort to recov
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According to the proposals, the age
Page 106 and 107:
and employers concerning registrati
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suggest that attitudes are continui
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84 • a regional informational pro
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12. International Contact and Coope
Page 114 and 115:
13. Skills and Methods Development
Page 116 and 117:
Since the autumn of 2002, EBM has c
Page 118 and 119:
nesses under their control, grant l
Page 120 and 121:
social insurance offices could prev
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15 Problem Areas and Future Threats
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• higher unemployment • distort
Page 126 and 127:
15.3 UNDECLARED WORK IN CASH SECTOR
Page 128 and 129:
EBM’s pilot project on measures f
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15.5 AGENTS WHO AID ECONOMIC CRIME
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ied out indicate that most transact
Page 134 and 135:
Appendix 1 CHANGES PROPOSED BY SAME
Page 136 and 137:
SKV • SKV should have limited aut
Page 138 and 139:
Transport Workers’ Union VAT Info
Page 140:
Reported economic crimes have incre
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