<h2>Alcohol and tobacco products are brought into Finland as non-commercial imports and online purchases</h2>
<p>Passengers arriving in Finland from abroad may conceal commercial imports among non-commercial imports in an effort to evade excise duties. Private individuals are entitled to bring into Finland alcohol from another EU Member State duty-free within the value limits provided. Most passengers bring in alcohol for their personal consumption and transport it personally in line with regulations. When products are brought in for commercial or business use, the imports are subject to taxation regardless of quantities. Alcohol is brought into Finland from countries where taxes on alcohol are lower (e.g. Estonia, Latvia, Germany). This is a phenomenon known in European countries with substantially higher alcohol prices compared to their neighbouring areas. Imported alcohol may be distributed for sale in, for example, bars and restaurants.</p>
<p>Alcohol is also ordered in Finland from foreign online shops. If an online alcohol retailer located in another EU Member State organises the transport of its products to Finland, this is considered a form of distance sales, so the primary tax liability rests with the company selling the alcohol. The buyer is jointly responsible for the excise duty with the distance seller if the seller has not complied with its obligations. Online alcohol retailers rarely fulfil their tax liability in Finland appropriately. Meanwhile, if the buyer orders alcohol from an online retailer located in an EU country and arranges the shipping independently, this is considered distance buying, in which case the buyer is responsible for the taxes.</p>
<p>In recent years, the professional and large-scale smuggling of illegally manufactured cigarettes has been particularly prominent in the illegal trade in tobacco products, which exploits cross-border commercial goods transport. In addition to cigarettes, other tobacco and nicotine products also involve smuggling and illegal trade in Finland, which takes various forms and is influenced, among other factors, by changes in the regulation of these products.</p>
<h3>Passenger imports in decline, online sales on the rise</h3>
<p>Non-commercial import of alcohol has been gradually increasing after a decline during the coronavirus pandemic, but it has not reached pre-pandemic levels. Online trade in alcohol has been growing similarly to other e-commerce. Online shops for alcohol which actively sell alcoholic beverages to Finland have been established in countries such as Estonia and other Baltic countries.</p>
<p>The aim of the import of alcohol and tobacco products against regulations is to avoid import and excise duties, and this conduct often meets the criteria of tax fraud. Importing goods against regulations may also meet the criteria of smuggling.</p>
<h3>The illegal import of alcohol and tobacco erodes the tax base</h3>
<p>The smuggling of alcohol and tobacco products decreases tax revenue. Smuggled goods end up in the black market, and they are sold online, for instance, also to minors. In practice, anyone can purchase the alcohol and cigarettes sold online. In addition, illegally manufactured products pose an increased health risk, as they are not subject to legal market surveillance and therefore do not meet the requirements set for product ingredients and other characteristics.</p>
<p>Customs and the Tax Administration are engaging in active collaboration in the area of tax supervision. The excise duties are levied by the Tax Administration. The Police and Customs investigate suspected offences related to the sales of alcohol, tobacco and snus.</p>
<h2>Value-added tax avoided in EU trade for vehicles and other consumer products</h2>
<p>VAT fraud related to the trade in vehicles and other products sold to consumers in the EU is exploiting the weaknesses of the VAT system of intra-EU trade. These typically involve procurement fraud, in which the value-added tax paid on the purchase of a commodity is left unpaid. Those committing fraud can sell the products to retailers or consumers at a lower price or higher profit than the competitors operating correctly. Fraud is often committed with high-volume hit products.</p>
<p>This is a Europe-wide phenomenon and fraud is committed by the members of domestic and foreign organised crime groups. The operations often also involve other crimes, such as financial, order and purchase fraud, counterfeiting of goods and identity abuse.</p>
<p>Procurement fraud typically involves so-called buffer companies or other arrangements that deliberately obscure the supply chain in order to complicate supervision by the authorities. The simplest model is based on quick activities by fraudsters in companies operating for a short period of time. The most common types of fraud in vehicle trade are the non-payment of taxes related to EU purchases, marginal tax fraud, counterfeit invoices and fraud related to the use of buffer companies.</p>
<h3>VAT fraud causes significant damage</h3>
<p>This phenomenon distorts competition and reduces tax revenue. In addition, the phenomenon involves applying for unjustified VAT refunds, i.e. unjustified payment of already collected tax revenue to fraudsters. There is no precise estimate of the amount of damage caused by VAT fraud in the trade in consumer products, but according to the Finnish Tax Administration, VAT fraud in intra-community trade causes a total tax gap of approximately EUR 100-150 million each year.</p>
<p>Fraud in value-added taxation meets the definition of a tax offence. The Tax Administration supervises misconduct in value-added tax. Finnish Customs is responsible for controlling imports. These public authorities cooperate with the Police in investigating offences related to value-added tax.</p>
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<h2>Falsifying the origin of foodstuffs is the most common form of food fraud in Finland</h2>
<p>There are several types of irregularities related to food trade. The country of origin may be different from the one labelled, or its consistency may be altered in a variety of ways. For example, the product may be manufactured using cheaper raw-materials than those labelled and even prohibited raw-materials may have been used.</p>
<p>The information on ingredients, quality and means of production may also be falsified. The most common form of food fraud in Finland is false country-of-origin labelling. For example, the production costs of berries, meat and fish are relatively high in Finland, which creates an incentive falsely label the country of origin as Finland.</p>
<p>Sometimes, a poor harvest of a given farm product may lead to a situation where demand exceeds supply. For example, the poor hazelnut in 2016 led to a supply of fake hazelnut ingredients. Fake hazelnut probably did not reach the Finnish markets.</p>
<p>Demand may exceed supply for many reasons, such as a sudden global food trend. Peaks in demand create extra pressure on the distribution chain to supply the product as quickly and as much as possible. As counterfeiting food is simple, markets situations such as these create an incentive for deception. Coconut water is a good example of a food product whose demand soared within a short period on the world market and which was subsequently counterfeited in 2017. Fake coconut water has probably not reached the Finnish markets.</p>
<p>Food fraud can take place at any point of the production chain, including between companies, such as the importer and retailer. The phenomenon is international because food trade is international. With the improved collaboration between national authorities, several large transnational fraud cases have been resolved in the past few years.</p>
<h3>Food fraud is about deceiving the consumer or another business – and often taxes are evaded</h3>
<p>One common denominator in food fraud is the attempt to gain unjustified financial advantage. There are numerous different ways of committing food fraud and new methods regularly come to light. One method is to evade supervisory fees, which can generate a substantial unjustified financial advantage in the long run.</p>
<p>Apart from consumers, other victims of food fraud are other food industry businesses. The food industry has, therefore, developed its own anti-fraud mechanisms in recent years. Food industry companies do not always report fraud to the authorities, as there may be major risks to the company’s reputation involved. When investigating food fraud, it has also been noticed that the perpetrators often pursue added financial advantage by not paying taxes or other statutory fees.</p>
<p>Food fraud often fulfils the criteria for a criminal offence. Besides fraud, the offences can also meet the criteria of a health offence, forgery, marketing offence, endangerment of health and, in the worst case, even negligent homicide. If the operators fail to pay taxes and other statutory obligations, the conduct meets the criteria of a tax offence or an offence by a debtor.</p>
<p>Food safety is controlled by the Finnish Food Authority, Regional State Administrative Agencies, local authorities, Customs, the National Supervisory Authority for Welfare and Health (Valvira), the Finnish Defence Forces and the Centres for Economic Development, Transport and the Environment. The Tax Administration and Customs control the sales taxation and import of products.</p>
<p>According to a 2017 report compiled for the UK food and drink sector, the industry could be losing up to GBP 12 billion (approx. EUR 13.4 billion) annually because of food fraud. There is no similar study made in Finland, but based on earlier international estimates, approximately 97% of food fraud goes undetected. According to the same estimates, the proportion of undetected food fraud is estimated to equal 3% of total volume in the food and drink sector. In Finland, this would mean an estimated EUR 500 million loss annually.</p>
<h2>Hidden subscription traps in distance sales</h2>
<p>Online merchants, telemarketers, email marketers, and similar operators may create a subscription trap by providing misleading information about the content of an order. For example, the first instalment of the order is marketed merely as a product sample with no obligation for further orders, or as an entry in a supposed lottery. In this way the consumer is deceived into committing to a subscription that does not correspond to the original marketing of the product or service. The undue payments related to subscription traps are typically collected by invoice or as direct debits from the consumer’s credit card.</p>
<p>Subscription traps can meet the criteria for fraud and marketing offences. This phenomenon undermines consumers’ trust, especially in online shopping, but also in telemarketing. Subscription traps cause financial damage, for example, in cases that lead to monthly payments being charged from a credit card. They often also involve collection operations, which result in many paying the undue fee out of fear of threatened consequences (e.g. loss of credit information, court case).</p>
<h3>Subscription traps are set by both Finnish and foreign operators</h3>
<p>Subscription traps for distance sales are often set by foreign companies, but there are also Finnish operators involved. While consumers are usually selected as the target, companies should also be vigilant. Subscription traps have been observed in lines of business sectors whose products are sold online. These include natural remedies and beauty care products (product sample type subscription traps) and dating services. Under the right circumstances, anyone can fall for a well-designed subscription trap.</p>
<p>This phenomenon is growing, as with any trade on the Internet. <a href="https://commission.europa.eu/system/files/2020-01/survey_on_scams_and_fraud_experienced_by_consumers_-_final_report.pdf" target="_blank" rel="noopener">According to a study commissioned by the European Commission</a>, eight per cent of EU consumers had fallen for a subscription trap in the previous two years. Consumers typically realise they are in a subscription trap only when they try to cancel the subscription.</p>
<p>Subscription traps are prevented through information, supervision and guidance The Consumer Ombudsman seeks to prevent consumers from falling into subscription traps by providing information. In addition, illegal practices by companies offering subscription traps are countered through supervision or by making the operations financially unprofitable. Interventions are made in the activities of collection agencies and payment service providers when the claims are unjustified. Consumers have been guided on a case-by-case basis regarding the unjustified collection of claims, and general guidelines have also been provided. Negotiations with collection agencies and payment service providers have also yielded results. Meanwhile, negotiations with the subscription trap companies themselves have been unproductive. The Consumer Ombudsman’s means are rather ineffective unless the (cross-border) subscription trap company voluntarily makes improvements to its activities after the negotiations. However, negotiations with Finnish telesales companies have been more successful.</p>
<p>Active awareness-raising efforts have increased consumer knowledge of the phenomenon and thus helped prevent new cases of subscription traps. In addition, consumers have been able to contact the Consumer Advisory Services of the Finnish Competition and Consumer Authority and the European Consumer Centre for advice in their own cases. Although these parties have not been able to mediate actual cases of fraud, consumers have, for instance, been advised not to pay undue bills. When the company has noticed that consumers are not paying claims based on a subscription trap, the collection and marketing of such claims has ceased.</p>
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