Much unnecessary work caused by payment of taxes

A study reveals that tax payment transactions cause 500,000 unnecessary work hours annually.

A study by the Finnish Federation of Financial Service Companies shows that payment and refund of taxes leads to a great deal of unnecessary work, both in accountancy firms and in companies. The number of unnecessary work hours accrues to half a million annually. That time is worth almost €15 million. Over 600 financial service professionals from accountancy firms and companies’ finance departments took part in the study.

“A huge amount of valuable working time is wasted on processing the payment and refund of taxes. These hours could be used to benefit the Finnish economy if the Tax Collection Act were amended,” Jari Seppä, CEO of the Finnish Federation of Financial Service Companies, says.

The unnecessary work related to the processing of payments and refunds could be reduced by simplifying the stipulations of the Tax Collection Act. In addition to the Finnish Federation of Financial Service Companies, the Finnish SME association Suomen Yrittäjät, the Confederation of Finnish Industries and the Tax Administration support the changes.

“Clarifying the Tax Collection Act would reduce taxpayers’ needs to interact with us and lighten the administrative burden. Such a reform would benefit both our customers and the tax administration,” Ari Mäkelä, Senior Director of the Tax Administration, says.

Reduced predictability

In the worst case, an accountant may have to investigate which tax payment a client company’s money has been directed towards. Ambiguity regarding the application of taxes paid also causes companies constant cash flow problems, when funds reserved for taxes may have to be spent on a different tax payment. Cash flow management becomes significantly more difficult when a company is unable to predict when, for example, VAT will be refunded.

“For example, as it stands, a VAT refund of a significant size may be used against an income tax instalment which has yet to fall due, rather than the money being refunded to the company. This could be very problematic for an individual company,” Laura Kurki, a specialist at Suomen Yrittäjät, says.

Three hours of unnecessary work a month

The study shows that a single accountant spends an average of three hours of unnecessary work a month searching for payments and allocating instalments in the books.

“The smallest businesses often don’t use accountants; instead they try to meet their tax applications themselves. These sole traders always call the Tax Administration to sort out their affairs. The feedback we’ve received indicates that the tax administration isn’t even able to help them in all cases,” Kati Malinen, Legal Affairs Director at the taxpayers’ association Veronmaksajat says.

In 2021, the tax administration made a proposal for the simplification of the payment and refund stipulations of the Tax Collection Act to the Ministry of Finance.

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