Norwegian Govt Tax on Bonuspoints
Jan 8, 2019, 7:10 pm
#16
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That is a quite clever approach, as it has very little admin burden, relatively low value as I assume this is based on the book value on loyalty program side, and basically gets the tax incorporated in the costs of the product in the first place.
Jan 8, 2019, 7:17 pm
#17
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As mentioned above, using points earned as part of work trips are now taxable. Not just income tax, but also national insurance (Arbeidsgiveravgift). This would also include points earned on the ground (eg Amex paid restaurants).
So far, SAS have said no to provide this info to authorities. A number of Norwegian companies (incl Telenor & Statoil) have implemented a blanket ban on using miles, however if an employee were to accumulate miles on a foreign programme and not report it nobody would know. And I have never heard of any companies that require a paper copy of the boarding pass for the travel claim.
So far, SAS have said no to provide this info to authorities. A number of Norwegian companies (incl Telenor & Statoil) have implemented a blanket ban on using miles, however if an employee were to accumulate miles on a foreign programme and not report it nobody would know. And I have never heard of any companies that require a paper copy of the boarding pass for the travel claim.
Jan 9, 2019, 2:58 am
#18
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This is quite clever, the big employers do not want to take away the benefits of gold cards (also benefits the company) but they have made sure they cannot be pursued by the tax authorities in case an employee uses points earned on company travel for a private trip. Clearly the need to report all this and the added tax to be paid meant that no big employer was ever going to allow private use of company earned points, it is simply too costly. Of course the employers have no insight into private FF accounts and currently neither do the tax authorities.
Jan 9, 2019, 3:50 am
#19
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As a company it is not about compelling employees to rat on themselves to use that terminology. It is about getting the necessary disclosure completed with the minimum effort. Which is either banning the accrual of points on corporate travel, or banning the use of the points for personal use. Everything else is a mess for the company, and it even costs the company money when the employee use the points privately.
Can the employee circumvent the rules, of course they can. But if the rules are made correctly, that is a point between the employee and the tax authorities.
There is no doubt that the points are a taxable benefit in Norway and have been for a long while, this applies to Denmark and Sweden as well. I would imagine that in a number of other countries it would be the case as well. The new thing is that the Norwegian government has chosen to pursue this. If they start generating a reasonable tax revenue from this, be prepared for this to come up again in Sweden and Denmark as well.
From a data analytics perspective, it is not that big dumps that are needed, it is pretty straightforward. For SK and DY no doubt the tax authorities can get the information needed, for EU Airlines I would expect that they can get it as well. For airlines outside the EU, I doubt it would be possible. Or at least require advance evidence of tax evasion, which they won't have as they are asking for the data to build the evidence.
Dont take this as me defending the change, I doubt that they will get any significant revenue from it, and certainly not in relation to the administrative burden that they create for themselves for companies, and for the employees. However as with all taxation performance measurement is only about what they can claw in, not the efforts and costs applied in doing so.
Can the employee circumvent the rules, of course they can. But if the rules are made correctly, that is a point between the employee and the tax authorities.
There is no doubt that the points are a taxable benefit in Norway and have been for a long while, this applies to Denmark and Sweden as well. I would imagine that in a number of other countries it would be the case as well. The new thing is that the Norwegian government has chosen to pursue this. If they start generating a reasonable tax revenue from this, be prepared for this to come up again in Sweden and Denmark as well.
From a data analytics perspective, it is not that big dumps that are needed, it is pretty straightforward. For SK and DY no doubt the tax authorities can get the information needed, for EU Airlines I would expect that they can get it as well. For airlines outside the EU, I doubt it would be possible. Or at least require advance evidence of tax evasion, which they won't have as they are asking for the data to build the evidence.
Dont take this as me defending the change, I doubt that they will get any significant revenue from it, and certainly not in relation to the administrative burden that they create for themselves for companies, and for the employees. However as with all taxation performance measurement is only about what they can claw in, not the efforts and costs applied in doing so.
Maybe it’s time for Scandinavian tax authorities to catch some Scandinavian high flyers with major public attention and rake them over the coals for their use of frequent flyer program benefits for personal use after expensing the flights for work purposes?
SK and DY frequent flyer program data doesn’t included tax identification numbers for most of its customers, but for most of the Scandinavian customers forced compliance and related penalties could be the product of as little as a few major data dumps and a couple of batch processes and it’s game over for those out of compliance with tax rules.
Perhaps more SK EuroBonus customers will update their address on file to keep it out of the target areas and to perhaps even use name variation games on accounts and bookings so as to try to evade due taxes?
Jan 9, 2019, 3:55 am
#20
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This is quite clever, the big employers do not want to take away the benefits of gold cards (also benefits the company) but they have made sure they cannot be pursued by the tax authorities in case an employee uses points earned on company travel for a private trip. Clearly the need to report all this and the added tax to be paid meant that no big employer was ever going to allow private use of company earned points, it is simply too costly. Of course the employers have no insight into private FF accounts and currently neither do the tax authorities.
Jan 9, 2019, 4:57 am
#21
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From a data analytics perspective, it is not that big dumps that are needed, it is pretty straightforward. For SK and DY no doubt the tax authorities can get the information needed, for EU Airlines I would expect that they can get it as well. For airlines outside the EU, I doubt it would be possible. Or at least require advance evidence of tax evasion, which they won't have as they are asking for the data to build the evidence.
Jan 9, 2019, 5:38 am
#22
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The concept is easy while the execution is difficult and likely costs more to implement than it is worth in revenue. The carriers hate it, employers hate it, and employees hate it. Thus, it is essentially a political question to be dealt with as all political questions are.
Unfortunately, to the general public who do not fly a lot and do not significantly participate in any FFP, this all looks like some form of secret benefit which allows people to fly in luxury around the world while they are stuck at home paying taxes.
The US came very close to implementing this, e.g. considering miles and points earned through tickets paid for by third parties such as employers as taxable income. While it all seemed quite logical as a taxable benefit, in the end the entire scheme fell apart because it would have been far too hard and expensive to administer.
I do agree that if one is going to implement this, someone has to find a CEO or other "high flyer" somewhere as the poster child for the first evasion case. Trying to chase every poor slob for the cut rate redemption ticket he managed for a weekend somewhere is ill-fated.
Unfortunately, to the general public who do not fly a lot and do not significantly participate in any FFP, this all looks like some form of secret benefit which allows people to fly in luxury around the world while they are stuck at home paying taxes.
The US came very close to implementing this, e.g. considering miles and points earned through tickets paid for by third parties such as employers as taxable income. While it all seemed quite logical as a taxable benefit, in the end the entire scheme fell apart because it would have been far too hard and expensive to administer.
I do agree that if one is going to implement this, someone has to find a CEO or other "high flyer" somewhere as the poster child for the first evasion case. Trying to chase every poor slob for the cut rate redemption ticket he managed for a weekend somewhere is ill-fated.
Jan 9, 2019, 6:36 am
#23
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True, but the onerous of taxation in Scandinavia is not for the authorities to prove your guilt, but for you to prove your innocence. They just have to raise the redemptions as a case, it will be for the traveller to prove that it was not for points earned on travel paid by the employer.
Jan 9, 2019, 12:00 pm
#24
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True, but the onerous of taxation in Scandinavia is not for the authorities to prove your guilt, but for you to prove your innocence. They just have to raise the redemptions as a case, it will be for the traveller to prove that it was not for points earned on travel paid by the employer.
Jan 9, 2019, 1:12 pm
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Jan 9, 2019, 3:01 pm
#26
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Jan 9, 2019, 3:11 pm
#27
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You will have to consider what information the employee provides to the authorities. Let's say that the authorities have obtained a transcript of all points transactions from SK. If the employee provides no information, then the authorities might not have to spend a lot of time on the matter: just fine the guy. On the other hand, if the employee claims that everything has been properly declared and as evidence provides a bag with unsorted documents (flight/train/hotel booking confirmations, boarding passes, train tickets and other things), claiming that these are documents from all business trips the employee ever has made, then how much time do you think it's going to take the authorities to compare the documents against the Eurobonus transaction statement? Some documents might be in exotic languages.
Jan 9, 2019, 3:40 pm
#28
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In which case the tax authorities would stick to their conclusions and tax the person. The burden of proof will rest on the tax payer, a bag of unsorted documents, half of them in Chinese or what ever, will not lift that burden. In tax cases basically guilty until proven innocent....
Jan 9, 2019, 6:23 pm
#29
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Then what documents is the person supposed to provide? If you book a flight, the booking confirmation may be the only evidence you have of the flight, and if you're flying with a Chinese airline, the booking confirmation may be in Chinese. I prefer to use the local version of a website if I can manage the language as translations can be strange and buggy and unreliable.
In the latter case, the traveller would need to justify that enough flights were bought and paid privately to accumulate the point balance needed for paying the privately used redemption.
Jan 10, 2019, 2:11 am
#30
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What would happen in the case of FFP points earned from work being used for personal travel in such a way that the FFP points resulted in a higher cost of travel from airline surcharges/fees than buying a regular paid ticket for the very same flights? "He/she claimed to have used the points without any personal gain, how do we tax that"? There are situations where regular paid tickets for a flight may cost less money than a ticket being paid with just points because of the airline "surcharges" and other FFP-related airline fees involved in redeeming the points for a ticket for the very same flight. In this kind of situation too, the employee who accumulated FFP points from employer-related travel too will still be in a potential pickle of a situation.
The Scandinavian tax authorities are already used to dealing with material in various foreign languages, including various Asian languages where a script other than the Roman alphabet may be part of the documentation used by those filing/adjusting tax declarations or otherwise responding to Scandinavian tax authorities.
Perhaps more people will start opening one FFP account for work and another FFP account for personal use -- this has been part and parcel of operations for people in some other places too.
I have no doubt that there is some amount of travel expense-related embezzlement and tax fraud, travel-related tax fraud, travel-related insurance fraud, travel-related VAT-refund and customs-duty-avoidance fraud; and I have no doubt that tax authorities in Scandinavia aren't completely unaware of the use of questionable documents, in Asian languages or otherwise, being used to further such schemes by some such frequent flyers. The former almost certainly involve far more material amounts of money than FFP earnings from employer-paid travel. Probably where there is more FFP-related tax fraud going on, there is way more other forms of fraud going on, so if the tax authorities catch a person doing one form of fraud, they may have higher chances of finding other forms of fraud too that involve far more material amounts of money. This kind of approach may be sort of akin to the idea of cracking down hard on people who engage in petty theft and other small crimes in order to reduce the overall crime rate; and so cracking down hard on somewhat petty forms of tax fraud may reduce the overall amount of tax fraud as people get hit by a greater fear of "the Man"/"the System" or whatever you want to call the government.
Then what documents is the person supposed to provide? If you book a flight, the booking confirmation may be the only evidence you have of the flight, and if you're flying with a Chinese airline, the booking confirmation may be in Chinese. I prefer to use the local version of a website if I can manage the language as translations can be strange and buggy and unreliable.
Perhaps more people will start opening one FFP account for work and another FFP account for personal use -- this has been part and parcel of operations for people in some other places too.
I have no doubt that there is some amount of travel expense-related embezzlement and tax fraud, travel-related tax fraud, travel-related insurance fraud, travel-related VAT-refund and customs-duty-avoidance fraud; and I have no doubt that tax authorities in Scandinavia aren't completely unaware of the use of questionable documents, in Asian languages or otherwise, being used to further such schemes by some such frequent flyers. The former almost certainly involve far more material amounts of money than FFP earnings from employer-paid travel. Probably where there is more FFP-related tax fraud going on, there is way more other forms of fraud going on, so if the tax authorities catch a person doing one form of fraud, they may have higher chances of finding other forms of fraud too that involve far more material amounts of money. This kind of approach may be sort of akin to the idea of cracking down hard on people who engage in petty theft and other small crimes in order to reduce the overall crime rate; and so cracking down hard on somewhat petty forms of tax fraud may reduce the overall amount of tax fraud as people get hit by a greater fear of "the Man"/"the System" or whatever you want to call the government.
Last edited by GUWonder; Jan 10, 2019 at 2:32 am