Tax Evasion And Fraud Under Finnish Law
1. Tax Evasion and Fraud in Finnish Law
A. Tax Evasion (“Veropetos”)
Legal basis: Chapter 29, Section 1 of the Finnish Criminal Code (Rikoslaki 39/1889, modern version updated)
Definition:
Tax evasion occurs when a person:
Intentionally gives false information,
Conceals income, assets, or other taxable items,
Or otherwise unlawfully avoids taxes.
Key elements:
Intentional conduct – negligence is generally not enough.
Unlawfulness – the act violates Finnish tax regulations.
Material significance – the evaded tax must be above a certain threshold for criminal liability.
Punishments:
Fines or imprisonment (up to several years for aggravated cases).
B. Fraud (“Petos”)
Legal basis: Chapter 36, Section 1 of the Finnish Criminal Code
Definition:
Fraud occurs when someone:
Deceives another person by misrepresentation, concealment, or other trick,
Intentionally gains a benefit or causes someone else a loss.
Distinction from tax evasion:
Fraud can occur in many contexts (contracts, property, loans).
Tax evasion is a specific type of economic crime targeting the state.
2. Finnish Supreme Court Cases on Tax Evasion and Fraud
Here are six detailed cases, including facts, court reasoning, and implications.
CASE 1: KKO 2010:64 – Intentional Tax Evasion
Facts:
A business owner deliberately underreported taxable income over several years by falsifying invoices and bank statements. Tax authorities discovered discrepancies in auditing.
Court reasoning:
The Supreme Court emphasized intent and systematic concealment.
Liability was based on repeated, deliberate acts rather than a single misreport.
Attempting to claim that the misstatements were “clerical errors” was rejected.
Outcome:
Conviction for tax evasion, imprisonment sentence imposed.
Significance:
Finnish courts require clear evidence of intentional misreporting.
Mere negligence or accounting errors are generally insufficient.
CASE 2: KKO 2014:72 – Aggressive Use of Shell Companies
Facts:
A taxpayer used a network of foreign shell companies to route income and avoid Finnish taxation. The taxpayer argued the arrangements were legal tax planning.
Court reasoning:
Court distinguished legal tax avoidance from illegal evasion.
Intent to conceal income from authorities established criminal liability.
Court applied the principle that complex corporate structures cannot shield illegal activity.
Outcome:
Conviction for aggravated tax evasion.
Significance:
Finnish law targets economic substance over formal structure.
Abuse of complex structures for tax concealment is criminal.
CASE 3: KKO 2007:48 – VAT Fraud in Construction
Facts:
A construction company claimed false VAT deductions for materials never purchased.
Court reasoning:
Fraud occurs when false declarations result in financial gain at the expense of the state.
Even if the company argues “honest mistake,” repeated patterns indicate intentional deception.
Outcome:
Conviction for tax fraud, fines and partial imprisonment imposed.
Significance:
Finnish courts treat VAT fraud seriously, particularly for companies with repeated offenses.
Intent is inferred from patterns of conduct.
CASE 4: KKO 2012:56 – Underreported Income by Self-Employed Professional
Facts:
A self-employed consultant received payments in cash and did not report them. Authorities discovered the omission via bank data and third-party invoices.
Court reasoning:
Court examined whether underreporting was intentional or negligent.
Evidence included mismatched invoices and inconsistent bank records.
Intent was key: deliberate omission led to conviction.
Outcome:
Conviction for tax evasion.
Significance:
Finnish courts emphasize paper trail and documentation.
Cash-based transactions are scrutinized heavily to detect evasion.
CASE 5: KKO 2016:55 – Fraud Through Misrepresentation of Expenses
Facts:
A company owner claimed personal expenses (private trips, family vacations) as business deductions to reduce taxable profit.
Court reasoning:
Misrepresentation of expenses constitutes fraudulent intent if done to reduce tax liability.
Court considered whether the misstatement was significant enough to affect tax liability.
Outcome:
Conviction for fraudulent tax evasion.
Significance:
Finnish law penalizes abuse of deductible expenses when intended to deceive authorities.
CASE 6: KKO 2005:35 – Conspiracy to Evade Taxes
Facts:
Several company owners coordinated to funnel profits through multiple small companies to evade corporate taxes.
Court reasoning:
Coordinated efforts indicate conspiracy, not isolated errors.
Courts held that joint intent is sufficient for liability even if no single actor did everything alone.
Outcome:
Conviction of all participants for tax evasion and conspiracy.
Significance:
Collaborative schemes to evade taxes are prosecuted rigorously.
Finnish law punishes both the planning and execution phases.
3. Key Legal Principles Illustrated
| Principle | Explanation | Case Reference |
|---|---|---|
| Intentionality | Must show deliberate misreporting or concealment | KKO 2010:64, KKO 2012:56 |
| Substance over form | Shell companies or complex arrangements cannot shield illegal acts | KKO 2014:72 |
| Pattern of conduct | Repeated behavior strengthens inference of intent | KKO 2007:48 |
| Misrepresentation of expenses | Deduction abuses can be criminal | KKO 2016:55 |
| Conspiracy/joint liability | Coordinated evasion is punishable even if tasks split | KKO 2005:35 |
4. Summary
Tax evasion and fraud are serious offenses in Finland, punishable by fines and imprisonment.
Key elements: Intentional deception, unlawful avoidance, significant financial impact.
Finnish courts rely heavily on documentation, patterns of behavior, and financial trails to establish intent.
Methods such as shell companies, misreported VAT, fake deductions, and cash income concealment have all resulted in Supreme Court convictions.
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