Tax evasion poses threat to welfare

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Norway’s state economic crime unit Økokrim has singled out tax evasion as posing among the biggest threats to the welfare state that’s been built up since World War II. Everything from subsidized day care to pension payments is threatened by Norwegian individuals and companies that avoid paying taxes owed.

Petter Nordeng, a lead prosecutor for state economic crimes unit Økokrim, considers tax evasion a major threat to the sustainability of Norway’s welfare state. PHOTO:Gorm K. Gaare/EUP-BERLIN

While immigrants and asylum seekers have often been targeted as costly and posing threats to the welfare state, tax evasion diverts much more money from the system, according to a new threat evaluation presented by Økokrim this week. Prosecutors claim that hundreds of billions of kroner that could have been added to the state budget and helped finance even more Norwegian welfare benefits such as child care, paid maternity and paternity leave, sick leave and health care, have instead remained in the accounts of wealthy individuals and profit-minded companies.

Økokrim reported that tax evasion is steadily found among Norwegians living abroad, also those who don’t declare taxable assets like foreign bank accounts or holiday homes. There’s also a “trend,” according to Økokrim, that revenues generated by small- and medium-sized businesses are channeled to foreign bank accounts and therefore not declared as taxable revenue in Norway.

The police unit wrote in its threat evaluation for 2018 that tax crime “is still the biggest threat within traditional economic crime.”

‘Self-perpuating problem’
Petter Nordeng, a lead prosecutor for Økokrim, told newspaper Dagsavisen that not only are billions of kroner diverted from the state budget, it’s “a self-perpetuating problem. If you see that someone gets away with tax evasion, more will try to do so as well, and maybe even moreso. It’s clear we have to stop this.”

He admitted that Økokrim can only tackle “a handful” of cases every year and that officials have to set priorities. Amounts can be large, with one man convicted in January, for example, of having evaded taxes on NOK 15.7 million in income over just five years. A Norwegian company accepted a fine of NOK 85 million for having evaded taxes on NOK 291 million in revenues.

“The point of paying taxes is that everyone participates,” Nordeng said. “It’s terribly unfair and unreasonable for someone to take advantage of welfare benefits (like free hospitalization) that are paid for by taxpayers, if he or she hasn’t contributed themselves.”

Hans Christian Holte, Norway’s tax director who recently noted that taxes are “the price we pay to live in a civilized society,”  said the most recent estimates of tax evasion amount to as much as NOK 60 billion every year, including goods and services sold under the table. Holte noted that Norwegian officials could have funded far more social services, or built more schools and nursing homes, with that kind of money.

Widening social differences
Dagsavisen reported that the state tax agency that Holte oversees, Skatteetaten, claimed back taxes and assessed fines in 1,645 cases last year, and reported 346 cases of suspected tax evasion to the police. Tax evasion can also contribute to making the rich richer and the poor poorer, just as top politicians are tackling the problem of increased social and economic differences within Norway’s population. Around 10 percent of all Norwegians have relatively low income and the number of children living in relatively poor families in Norway has increased by 34,000 during the past decade, to more than 100,000.

Økokrim’s report was presented in connection with the state government’s effort to tackle widening income gaps among Norwegians. Prime Minister Erna Solberg’s government is working on a proposal to Parliament that addresses “social sustainability and how we can reduce differences.” The main goal is to prevent poverty.

That includes integration efforts and getting more immigrants into the work force so they, too, will pay taxes. Immigration “may have contributed to the bigger differences,” the government wrote on its own website this week. It added, however, that “higher education, higher participation in the workforce, development of the welfare state and improvements in a tax collection system that’s now heavily automated have also contributed to more even distribution of wealth in Norway over the years.” Norway continues to have the lowest level of social differences in an international context, because of relatively high income levels and a high standard of living.

newsinenglish.no/Nina Berglund