Is our tax revenue used efficiently?
Instead of celebrities’ earnings, discussions on this year’s ‘tax day’ in November turned to how the pool of taxes collected by the state is used in society. This turn of events delighted us at the National Audit Office. In addition to what our tax revenue is spent on, it is also important to know if the money has been used effectively and lawfully.
Every year in November, the so-called tax day comes round, on which press columns are filled with information on how much tax people we know from the television paid in the year before. However, knowing how much certain celebrities earned is not the most interesting aspect of the tax day from the National Audit Office’s perspective, as we focus our attention on how tax revenue has been spent and particularly on the question of whether it has been used effectively and as provided by law.
Citizens must be able to trust the state’s fiscal management
We know that Finns are relatively happy taxpayers, even by international standards. In a recent survey conducted by the Finnish Tax Administration, 93 percent of Finns agreed with the statement that paying taxes is an important duty of a citizen. The good results were influenced by the relatively large share of people who find that the Finnish Tax Administration is reliable and tax decisions are correct.
However, the same survey indicates that a perception of tax revenue being wasted on wrong targets has become more widespread. It is understandable that the rather large savings made by the Government have led to a critical debate on how the state spends taxpayers’ money.
The task of the National Audit Office is to help maintain trust in the state’s fiscal management, including its lawfulness and appropriateness. This is what the NAOF’s audits seek to ensure.
The state’s fiscal management is fairly reliable but there are shortcomings
We conduct annual financial audits on all central government accounting offices, which numbered 61 in 2024. This enables us to continuously collect audit evidence on the use of state funds.
Based on long-term monitoring data, we can say that fiscal management has remained on a relatively stable footing. Overall, the state’s fiscal management processes are fairly reliable, consistent and efficient. The level of budget compliance is high as a whole. The NAOF’s observations are also responded to well, and corrections are made and operating methods modified on their basis.
There is naturally room for improvement, too. Whereas the number of cautions issued by the NAOF to accounting offices increased slightly in the last few years, they returned to their previous level in the financial audits conducted in 2024. The decreased number of cautions is a positive trend, and hopefully an even lower level will be reached in the future. In 2024, one out of four state accounting offices had such material shortcomings in their final accounts or financial management that the NAOF issued them with a caution in the financial audit report.
Limited monitoring data and insufficient cooperation hamper efficient spending
The NAOF also audits the appropriateness of central government spending, ensuring that state funds are used economically, efficiently and effectively. These so-called performance audits are only conducted on activities in which significant amounts of state funds are used or which have a material impact on the state’s revenue, expenditure or assets.
The question of whether taxpayers’ money is spent appropriately is complicated and difficult. The state spends money on a wide range of different actions, and various organisations and people have their own views of what is necessary and how much of taxpayers’ money should be allocated and where. However, everyone would probably like to see tax revenue being used efficiently.
Unfortunately, the NAOF repeatedly comes across similar problems in our performance audits that hamper efficient spending. Information about the extent to which the funded actions contribute to achieving the objectives is often lacking. In the worst case, the objective itself is also unclear or poorly formulated. An attempt may additionally be made to achieve several different and partly contradictory objectives at the same time.
Individual actors may defend their own interests also in central government, which is why cooperation between organisations is far from optimal. When organisations do what they are accustomed to doing or what they can do themselves, this does not always lead to selecting the most effective measures.
The common funds collected as taxes must be used lawfully and effectively, and taxpayers must be able to trust that this will happen. This is in the best interests of both taxpayers and those who benefit from the tax money.