Norway boasts one of the world’s most transparent tax systems, and investments in its IT support infrastructure in recent years have helped to elevate a sense of impartial openness and harmony between the Norwegian Tax Administration (NTA) and the country’s population.
Several of the NTA’s more recent IT investments have been developed and delivered to make it easier for citizens to navigate the often perplexing bureaucratic processes of paying taxes. Taxpayers can now use online self-assessment tools to calculate their liabilities, and a recently launched digital service permits Norwegians to inspect the annual tax returns of other citizens once tax returns are posted online each October.
Now the NTA’s IT focus is about to move into a higher gear to tackle tax evasion linked to economic crime in the “black” economy. This area is proving increasingly problematic for Norway, particularly within the segment of the economy that favours cash transactions and payments.
Clouded by a lack of transparency, this area poses a serious challenge for the NTA, which has traditionally battled hard against losing revenue in an economy where the personal tax rate has averaged 42% over the 23 years to 2018. The total tax burden constitutes about 45% of the Norway’s GDP.
In its struggle to combat economic crime and tax evasion, the NTA must also clear the underlying hurdles in revenue collection that are further complicated by the country’s high corporate tax rate.
Enterprises in Norway pay 23% corporate tax on their profits, a rate that was reduced from 24% in January this year. By contrast, businesses in nearby Finland pay 20%, and the comparable rate in Sweden and Denmark is 22%.
The NTA’s direct response to tackling economic crime in the black, or shadow economy, was to scale up its IT capacity and competence to track, detect and bring more “bad actors” into the tax loop. Government estimates suggest the shadow economy equates to about 14% of Norway’s GDP, making it one of Europe’s worst affected.
This estimate is supported by a report from ATKearney, commissioned by Visa, that calculated Norway’s shadow economy to be worth €44.2bn (NOK420bn).
To bolster its arsenal of tax collection tools, the NTA has contracted Atea Group to deliver a customised analysis and information platform capable of handling and processing very large amounts of data gathered from a broad array of sources. It will focus on the activities of enterprises and private individuals.
Atea is one of Norway’s leading IT infrastructure and system integration players, recording revenues of €3.2bn in 2017.
Its three-year contract with the NTA is worth €10m and covers the design and provision of an advanced data analytical and information platform that will enhance the tax administration’s ability to detect suspicious economic crime activities. The new system, which is being delivered in partnership with IBM Norway, is designed to process large amounts of structured and unstructured data.
The contract will require Atea to operate the platform, utilising continuous real-time information streams. The platform will support ongoing NTA projects and strategy, developing increasingly sophisticated systems to detect tax evasion activities and schemes more effectively.
“The platform and new analysis tools will also make it easier for the tax administration to predict errors and provide opportunities for a better digital direction for the submission of tax returns,” said Michael Jacobs, Atea’s managing director.
Before joining Atea, former Oracle and Kodak executive Jacobs headed Microsoft Norway and Dell’s operations in Scandinavia.
The NTA’s new crime detection system incorporates a risk-based analysis platform designed by IBM which will enable the tax administration to adopt a more risk-based approach in its evaluation of businesses. The platform supports deep analysis of data backed by real-time risk assessment capabilities that are an improvement on the NTA’s current arsenal of tools.
“The platform will be integrated with the NTA’s own solutions,” said Arne Norheim, IBM Norway’s managing director. “It is designed to help the tax administration gain new insights into an area of major social importance.”
The platform provided by Atea in alliance with IBM includes components supplied by two other project partners – Acando and iKnow A/S.
Acando, an IT project consulting firm headquartered in Stockholm, deepened its relationship with IBM in December 2017 when it bought cloud services company Anywhere.24, one of Microsoft Dynamics 365’s leading partners in Germany within the customer relationship management (CRM) domain.
Oslo-based iKnow also has longstanding project collaboration relationships with both Atea and IBM. The software-driven process automation firm’s offerings include the provision of functionality for operating IBM’s InfoSphere DataStage ETL platform.
The new economic crime-focused system will integrate with the NTA’s Ntax enterprise architecture, which covers Norway’s 3.7 million salaried taxpayers. The authority’s taxation loop also includes 280,000 enterprises and 351,000 self-employed individuals.
The NTA administered the collection of about €117bn in taxes in 2017. Of this total, €20bn came from the petroleum sector, €27bn via the national sales tax, €16bn in employer’s national insurance contributions and €42bn in personal income and corporate taxes.
The NTA’s strategy to “get tougher” on economic crime and the black economy is spearheaded by a special independent unit within the administration which was initially created to tackle shortfalls in tax receipts in the greater Oslo region.
Recurring problems caused by black market racketeering, as identified by the NTA, are most prevalent in cash-based payment service sectors such as medical, hairdressing, taxis, florists and food catering. The NTA is also investing more in investigating cash businesses that may have links to money-laundering networks and criminal organisations.
The advanced data processing and analytical features of the new IT platform will also make it easier, and more operationally efficient, for the NTA to track tax evasion by Norwegian citizens attempting to disguise and hide assets, undeclared to the national tax authority, in overseas tax havens.