National Tax Association

Tax Compliance in the Rental Housing Market

Author(s): Essi Eerola, Tuomas Kosonen, Kaisa Kotakorpi, Teemu Lyytikäinen and Jarno
Tuimala
Source: Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting
of the National Tax Association , 2020, Vol. 113 (2020), pp. 1-34
Published by: National Tax Association

Stable URL: https://www.jstor.org/stable/10.2307/27143958

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 Tax Compliance in the Rental Housing Market:
Evidence from a Field Experiment∗
† ‡ §
Essi Eerola Tuomas Kosonen Kaisa Kotakorpi
¶ k
Teemu Lyytikäinen Jarno Tuimala

November 2020

Abstract

We study rental income tax compliance using a large-scale randomized field ex-
periment and register data with third-party information on the ownership of apart-
ments. We analyze the responses of potential landlords to treatment letters notify-
ing them of stricter tax enforcement, or providing simplifying information on filing
practices for the rental income tax. We find that both types of letters caused an
increase in the propensity to report rental income, with letters notifying landlords
of the use of third-party information in tax enforcement having the strongest effect.
Our research design also allows us to analyze different types of spillover effects in
tax enforcement. We find positive reporting spillovers within ownership networks,
but do not find evidence of spillovers between landlords in local rental markets.
JEL: H26, H31
Keywords: Tax compliance, field experiment, rental market.
∗
We would like to thank the team at the Finnish Tax Administration for cooperation in conducting
the field experiment. The Finnish Tax Administration neither endorses nor disagrees with the views
and opinions presented by the authors. We also thank pconference participants at IIPF Congress 2018,
NTA Congress 2018, MaTax Conference 2018, Workshop on Empirical Analysis of Tax Compliance at
University of Oslo, and seminar audiences at NHH Bergen, University of Turku and the Ministry of
Finance for helpful comments and discussions. The research received funding from the Academy of
Finland (grant no. 277283).
†
essi.eerola@vatt.fi, VATT Institute for Economic Research.
‡
tuomas.kosonen@labour.fi, Labour Institute for Economic Research.
§
kaisa.kotakorpi@tuni.fi, Tampere University.
¶
teemu.lyytikainen@vatt.fi, VATT Institute for Economic Research.
k
jarno.tuimala@vero.fi, Finnish Tax Administration.

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1 Introduction
This paper analyzes tax evasion and enforcement of income from rental housing using
a large-scale randomized field experiment. Rental income – i.e. income that landlords
receive from renting out a flat – is an interesting form of income to analyze for several
reasons. Much of the earlier literature on tax evasion concentrates on evasion of earned
income, by wage earners or the self-employed, while evidence on tax evasion from many
other income sources is lacking. Rental income is a significant source of tax revenue in
many countries. It is also a source of income where tax evasion may be prevalent, both
because of incentives and opportunities for evasion: incentives arise from high taxation,1
while opportunities stem from the fact that rental income is typically self-reported by
the taxpayer. Furthermore, the ownership of rental units tends to be widespread across
households, which makes labor intensive enforcement measures such as audits potentially
costly for tax authorities. Rental income also provides an interesting context to analyze
tax enforcement spillovers: Rental housing is a type of asset that is quite often co-owned
by several owners, which provides a natural setting for informational spillovers to arise.
Spillovers may also arise from market transactions when rental units are bought and sold.
The Finnish context is a particularly attractive environment to carry out an analysis
of rental income tax evasion and enforcement. First, institutional features of the private
rental market in Finland resemble those in many other countries, such as the U.K. and
the U.S, in that legislation of rental agreements is very flexible and rent-setting is not
subject to any restrictions. Second, we have access to unique administrative data, where
combining information from different government registers allows us to identify potential
landlords, and therefore to obtain a type of third-party information on potential income
that is otherwise self-reported.
We contribute to the literature analyzing tax evasion and enforcement with experi-
ments conducted with tax authorities, or with other exogenous variation (see Slemrod
(2019) for a survey). Our first contribution is to analyze tax evasion from rental income,
which previous literature has not focused on. We analyze a large scale RCT that we
implemented in co-operation with the Finnish Tax Authority.2 We also contribute to the
literature focusing on the use of third-party information in tax enforcement (Kleven et al.
(2011) or Harju et al. (2020)). Our contribution here is that our RCT creates exogenous
variation in informing taxpayers about the existence of third-party information coming
1
In many OECD countries rental property is the most heavily taxed type of asset (OECD (2018))
2
The experiment has been pre-registered at the AEA RCT Registry,
https://www.socialscienceregistry.org/trials/2575

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from administrative registers. Previous literature implementing randomised variation in
third-party information is scarce; see also the literature review at the end of this sec-
tion. The nature of the information we use is however very different from, for example,
withholding of taxes from labor income by employers. Such possibilities to create novel
combinations of administrative data in order to have third-party information on reports
of taxable income are likely to exist in other countries for rental housing income and for
other forms of taxable income in general.
We also contribute to the literature analyzing spillovers in the context of field exper-
iments (Crépon et al. (2013) and Pomeranz (2015)). Spillovers are an important aspect
3
of experiments, because they could either negate the main effects or fortify them. We
provide an exceptionally comprehensive analysis of tax enforcement spillovers, combining
an analysis of various types of spillovers within a single RCT. Our experiment has a block
design allowing us to analyze spatial spillovers. From our extensive administrative data,
we can also detect spillovers between spouses and within ownership networks. Finally,
our data allows us to examine the real effects of tax enforcement: do changes in effective
tax rates stemming from stricter enforcement affect the portfolio choice of investors? For
example, do they sell their rental properties, and purchase other assets instead?
To describe our setting in more detail, our comprehensive administrative data includes
information on ownership of properties, reporting of taxable income and information on
residences. This enables identifying apartments occupied by someone else than the owner,
and the owners of such apartments are classified as potential landlords in our study. That
is, even though such third-party information was not routinely used in the enforcement of
rental income taxation during the study period, it is possible to construct such measures
through combining information from different registers.
In the experiment, a randomly selected subset of potential landlords received letters
from the Finnish Tax Administration, notifying them of various features of rental income
tax filing and enforcement. The strongest treatment was to inform potential landlords
that the tax authority has access to information about potential rental apartments, and
that the recipient of the letter seems to own such an apartment. Other treatments aimed
to reduce compliance costs through providing information on filing practices, or notified
landlords of a general increase in enforcement intensity.
We find that the treatment letters affected the reporting behavior of potential land-
lords. The treatment informing potential landlords of the use of third-party information
3
Ignoring some of these responses also leads to biased estimates of the compliance gap (i.e. the amount
of tax revenue that can be recouped by more intensive enforcement; see e.g. Gemmell and Hasseldine
(2014) and Slemrod (2017).

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in tax enforcement, had the strongest effect. The effects are most pronounced in the case
of small-scale renting, where an enforcement strategy relying on audits would be partic-
ularly costly. Further, potential landlords who did not file any rental income in the year
prior to the experiment respond very strongly to the use of third-party information: the
propensity to report a positive amount of rental income was over 50% higher in this group
in the treatment year, compared to the baseline level in the control group.
We also find evidence of enforcement spillovers. We find a positive effect on reporting
within ownership networks. The effect is statistically significant and the point estimate
about as large as the direct effect. Because not all potential landlords are members of
an ownership network, the total impact of the treatment letters increases by about 20%
because of this spillover effect. For spouses we do not find any clear spillover effects.
We also analyse spatial spillovers using a block-design inspired by Crepon et al. (2013),
but do not find clear evidence of enforcement spillovers between landlords in local rental
markets. Finally, we do not find clear effects on housing market transactions, or on the
ownership of other assets.
Prior literature on rental income tax evasion is very scarce. Wenzel and Taylor (2004)
carried out an experiment where owners of rental properties were asked to itemize ex-
penses in tax returns, which led to a 5 − 7.5% reduction in reported expenses compared
to receiving an information letter only. Regarding the role of third-party information, its
importance in tax enforcement has been acknowledged in earlier literature (e.g. Slemrod
(2007), Kleven et al. (2011)), but research utilizing randomized variation in third-party
information is scarce.4 Harju et al. (2020) have implemented randomized variation in the
salience of third-party information, albeit in a quite different context, namely tax evasion
on car imports. Regarding spillovers, a few earlier papers have studied regional enforce-
ment spillovers between individuals in the context of TV license fee collection (Rincke and
Traxler (2011), Drago et al. (2015) and income tax filing (Meiselman (2018)). Frimmel
et al. (2018) and Alstadsaeter et al. (2019) analyze tax evasion and avoidance spillovers
within the family, while these two papers do not focus on the effects of enforcement
measures. Pomeranz (2015), Boning et al. (2018) and Brockmeyer et al. (2018) analyze
4
In Kleven et al. (2011), variation in 3rd party reporting comes from certain types of income being
subject to 3rd party reporting, while others (notably self-employment income) are not. In studying firm
responses to an audit experiment, Pomeranz (2015) compares those line-items in the VAT declaration
of firms that are covered by the paper trail (transactions between two firms) to line items that are not
(sales to final consumers). Naritomi (2019) compares retail transactions (where the extent of 3rd party
information increased due to a campaign that incentivized consumers to send in their receipts to the
authorities) and wholesale transactions (not affected by the campaign). In none of these studies was 3rd
party information itself subject to randomization.

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enforcement spillovers in firm networks. We contribute to this literature by analyzing tax
enforcement spillovers between landlords in local rental markets, between family members,
as well as between landlords within ownership networks.

2 Institutional Background
Overall, some 40% of Finnish households live in rental housing. This share is slightly
lower than, but not far from that in other countries (e.g. other Nordic countries, UK and
US).5 In general, the share is higher in large cities. For instance, in the capital city of
Helsinki the share of renters is slightly higher than 50%.
The rental market can be divided into the private rental market and social housing.6
We focus on the private rental market constituting roughly two thirds of the overall rental
market. In the private rental market, roughly half of the rental units are owned by large
institutional landlords. The other half are owned by private individuals. Currently the
net rental income is subject to a 30% capital income tax rate and 34% if taxable income
exceeds an annual threshold of 30,000 euros.7
Overall, in the private rental market, legislation on rental agreements is very flexible.
For instance, rent-setting is not subject to any restrictions.8 In addition, valid reasons for
contract termination include unpaid rents, sale of the dwelling by the landlord or personal
use. The annual mobility rate among renters is around 20% and is substantially higher
than the mobility rate of owner-occupier households.
The rental income tax is a non-negligible source of tax revenue in Finland. In 2015,
total reported rental income net of expenses amounted to 1.6 billion euros. The corre-
sponding tax revenue was more than 480 million euros (or 1.1% of the state tax revenue).
In the analysis, we focus on rental apartments owned by individuals. For the purposes
of this study, we identify likely landlords by combining register data on ownership and
flat occupancy in a manner discussed in more detail in Section 3.2.
Figure 1 illustrates the nature of the phenomenon under study. The figure shows the
share of individuals reporting rental income as well as the share of potential landlords and
5
http://www.oecd.org/social/affordable-housing-database/housing-market/ provides information e.g.
on the population share of owner-occupiers in different countries.
6
In the social housing sector, rents and tenant selection are regulated. The housing units are owned
by municipalities and non-profit organizations that are not subject to regular capital income taxation.
7
The tax rate has been slightly increased during the recent decades and the progressivity was intro-
duced in 2012.
8
In the case of long-term rental agreements, the rent is typically reviewed annually. The size of annual
rent increases must be specified in the lease agreement and is typically based on the cost-of-living index.

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total tax revenue by the number of potential rental apartments owned by the individual.

Figure 1: Rental income tax reporting by potential landlords

Notes: Figure describes reporting of rental income and the share of total tax revenue by the number of
potential rental flats owned in the end of tax year 2015. The data used in the figure contains individuals
in untreated control blocks (N = 19,028).

There are a number of interesting points to note from the figure. First, small scale
renting is highly prevalent, and significant from a tax revenue perspective: More than 80%
of all potential landlords own only one potential rental apartment, and their share of the
overall rental income tax revenue was almost 60%. Second, out of those individuals owning
one potential rental flat, roughly 75% reported some rental income to the tax authority
in tax year 2015. The figure also shows (right axis) the amount of rental income reported
in 2015 by the number of potential rental apartments owned.
As the ownership of rental units is widespread across households and small-scale land-
lords make up a large share of tax revenue, enforcement may be costly for tax authorities.
This underlines the importance of looking for ways to steer taxpayers to comply without
audits.
Turning next to the tax-filing procedure, pre-populated income tax returns are sent
out to taxpayers in late April each year. They contain information on incomes that are
subject to third-party reporting. Thereafter, the taxpayer is required to submit a revised
return to the tax authority if any income information is missing from the pre-populated
return. The taxpayer can also apply for discretionary deductions (e.g. expenses for travel
to work). The taxpayers have to submit their corrections in May; otherwise, the original
5

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proposal is implemented.
As income from rental property is not subject to any third-party reporting, individuals
with rental income always have to revise the pre-populated tax return and submit the
revision to the tax authority. Rental income is reported on a separate form (see Appendix
B), and income and deductible expenses have to be reported separately.

3 Research design and data

3.1 Experiment
3.1.1 Constructing the base population

The base population for the experiment was formed using national registers on flat own-
ership and flat occupancy to identify potential landlords.9 Information from different
registers can be combined using personal identification numbers that uniquely identify
individuals across different national registers.
We proceed as follows: Information on flat ownership is based on the situation at
the end of year 2015.10 Information on personal addresses, i.e. flat occupancy at the
end of 2015, is obtained from another government register. Combining information from
these different registers, we classify flats that are occupied by someone else than one of
the owners as potential rental flats. For each potential rental flat owned by at least two
individuals, we identify the main owner and allocate the flat to this specific owner. These
owners are classified as potential landlords.
From each household with more than one potential landlord, we include only one in
the base population. We construct households using information on the home address.
For each household, we identify the individual with the largest number of potential rental
flats and select only this individual to the base population. This guarantees that only
one member of each household receives the treatment and this individual is the one with
most extensive ownership. We also drop individuals with more than 15 potential rental
flats.
In addition, some flats have several owners who are not members of the same household.
We further restrict the base population so that we randomly keep only one of the owners of
9
We focus on flats in apartment buildings and leave out detached houses which are often located in
rural areas with thin rental markets.
10
We drop flats that have been bought in November or December because it is unlikely that a new
rental contract could have been made with a tenant before the end of 2015. We also drop flats with more
than 15 tenants and more than 5 owners.

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jointly owned flats. This minimizes unintentional spillovers across experimental treatment
groups, and at the same time allows a rigorous analysis of spillovers within ownership
networks.

3.1.2 Treatments

The treatment letters were sent out in April 2016 by the Finnish Tax Administration. The
letters were sent out just prior to the time when taxpayers received their pre-populated
income tax returns for income earned in 2015.
All in all, roughly 45,000 treatment letters were sent. The experiment consisted of
four different treatments: 1) Letter with a neutral reminder to file tax returns; 2) Letter
providing information on how to file rental income; 3) Letter notifying the recipient of a
general increase in the intensity of rental income tax enforcement; 4) Letter on intensified
enforcement of rental income taxation and a mention of the use of third-party informa-
tion on ownership of dwellings. All treatment letters (2)–(4) contained also the neutral
information provided in treatment letter (1), and therefore group (1) served as a baseline
for the actual treatments of interest.
The enforcement measures described in letters (3) and (4) were implemented by the
Finnish Tax Administration in summer 2016. The full letters are shown in Appendix B.
Table 1 shows our experimental design. We used a randomized block design, similar to
the design in Crépon et al. (2013), to assign individuals randomly to the four treatment
groups. To be able to analyze potential spatial spillovers of the treatments, we use the
following procedure. We first allocate each potential landlord in our base population to a
postcode area based on where the flats owned are located. Those owning flats in different
postcode areas are allocated to the postcode area with most flats. As we wish to analyze
spatial spillovers, we leave out areas that are mostly populated by owner-occupiers living
in detached houses, and select into the block design only postcode areas with a reasonably
dense rental market.11 These postcode areas (or blocks) are then randomly assigned into
three treatment groups with varying intensity of treatment: i) control blocks where no
letters were sent; ii) low-intensity blocks where 24% of potential landlords in the base
population received a letter; iii) high-intensity blocks where 62% of potential landlords
received a letter.12 In addition, the share of the stronger treatment letters (3) and (4) was
11
We leave out rural municipalities with less than 5,000 flats. Furthermore, we leave out postcodes
areas with less than 60 flats and with on average less than five flats per building. After these restrictions,
we have 263 postcode areas.
12
We first form groups of postcode areas with similar size. Then within each strata, randomly assign
postcode areas to different blocks.

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higher in the high-intensity blocks. For instance, out of those receiving a letter, roughly a
third in the low-intensity blocks and a half in the high-intensity blocks received letter (4).
Finally, to obtain (direct) treatment effect estimates for the entire population of potential
landlords, some treatment letters are also sent to randomly chosen potential landlords
who live outside of the areas included in the block design (second to last column in Table
1.

Table 1: Experimental design.

Low intensity High intensity

Control blocks blocks blocks Not in blocks Total

No letter 19208 21320 14995 28178 83701

Letter 1 0 1713 2502 4779 8994
Letter 2 0 1739 2383 4871 8993
Letter 3 0 1118 6476 1397 8991
Letter 4 0 2310 12863 2813 17986
Total 19208 28200 39219 42038 128665

Postcode areas 111 62 90 4200 4463

Notes: Table shows the number of letters sent to different groups of potential landlords in the base
population in the treatment and control groups as well as the number of postcode areas.

Figure 2 shows an illustration of the block design for Helsinki, the capital city and
largest municipality in our data. There are roughly 650,000 inhabitants and 80 postcode
areas in Helsinki. The postcode areas with a reasonably dense rental market are randomly
assigned to control, low-intensity or high-intensity groups (for data confidentiality reasons,
we are not able to show which ones).

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 Figure 2: An illustration of the block design for Helsinki.

Source: City of Helsinki, Map service. https://kartta.hel.fi/

3.2 Data
Our data contains very rich information on individual incomes from different sources,
assets, and taxes paid. Summary statistics of key variables in the data are reported in
Table A1 of Appendix A.
Given that landlords and rental markets not in the blocks are quite different from
those in the blocks, we utilize data from the blocks only in our main analysis and report
the results for individuals outside the blocks in the appendix. This choice also allows us
to analyze spatial spillovers, and to isolate the treatment effects of the letters from such
spillovers.
Table 2 describes reporting of rental income before the treatment (Panel A) and after
the treatment (Panel B). The comparison of different treatment groups in Panel A shows
that the randomization has been successful as the groups are very similar to each other
in terms of the pre-treatment propensity to report, reported gross rental income and
reported net rental income. This is to be expected by construction.
Overall, a comparison of Panel A and B indicates that the propensity to report rental
income is higher after the treatment. This is true also in the ”No letter” group. Such
changes over time may be due to general developments in the rental market. One specific
reason may be related to turnover: some of those who owned a potential rental flat in

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2015 may not have owned one in 2014. This would mechanically increase the propensity
to report from 2014 to 2015.
A first indication that the treatment had some effect on the propensity to report
rental income is visible in Panel B: For example, those receiving Letter (4) had a higher
propensity to report than those not receiving a letter or receiving Letter (1).

Table 2: Reporting of rental income before and after the treatment.

Reported rental Gross rental Net rental

income 1/0 income income
Mean Std. Dev. Mean Std. Dev. Mean Std. Dev.

Panel A: Before treatment (tax year 2014)

No letter 0.735 0.441 8146 23774 4473 14028
Letter 1 0.744 0.437 8040 16979 4485 13643
Letter 2 0.742 0.438 7743 11885 4267 7629
Letter 3 0.739 0.439 8143 17851 4601 11225
Letter 4 0.745 0.436 7911 16212 4342 8988

Panel B: After treatment (tax year 2015)

No letter 0.783 0.412 8994 25886 4910 15886
Letter 1 0.803 0.398 9029 20720 5043 15298
Letter 2 0.810 0.392 8564 12091 4733 7678
Letter 3 0.813 0.390 9092 18592 5106 11508
Letter 4 0.824 0.380 8890 17707 4910 10277

Notes: Table shows rental income reporting before the treatment (tax year 2014) and after the treatment
(tax year 2015) in the treatment groups.

3.3 Empirical strategy

We use the following Difference-in-Differences type model to estimate the effects of the
various treatments in our experimental design:

X X X X
yit = α+ζAf tert + βj Letj Af tert + γk Blok Af tert + λj Letj + ηk Blok +it (1)
j k j k

where yit is the outcome for individual i at time t. We control for general changes in
outcomes in the after period (either tax year 2015 or 2016) with dummy Af tert . We con-
sider the effects of the different treatment letters (Letj ) separately, and include dummies
10

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for high or low intensity blocks (Blok ). βj then identify the effects of the different letters
on outcome y. Similarly, γk identify the effects of being in a high or low treatment block
(over and above the direct effect of receiving a letter), relative to the control block.  is
the error term. We cluster standard errors at the postcode level.
We include individual fixed effects and control for the number of all flats owned.13 We
also control for the enforcement measures associated with the experiment.

4 Results
4.1 Direct effects
In this subsection we analyze the direct effects of the treatment. Recall that treatment
letters were sent out in spring 2016, just prior to the time when taxpayers received their
prepopulated tax returns for income received in 2015. Therefore tax year 2015 is the first
treatment year, and any effects observed in that year are pure reporting effects only, while
any initial real effects are ruled out by the timing of the experiment. Any effects observed
in subsequent years may however incorporate both reporting and real responses.
Figure 3 shows the development of the propensity to report rental income (left panel)
and the reported net rental income (right panel).14 Figure 4 and Figure 5 show the same
outcomes for two different subgroups of interest: In Figure 4 we divide the base population
into those who reported a positive amount of rental income in 2014, that is one year before
the treatment, and to those who did not report any rental income. In Figure 5, in turn,
we divide the base population according to the number of potential rental flats owned by
the individual.
The figures show that all letters affected rental income reporting of potential landlords,
especially on the extensive margin (propensity to report). The letter informing taxpayers
of the use of third-party information (letter 4) had the strongest effect. Effects appear to
be concentrated on those who reported no rental income in the previous year, and among
small-scale renters (individuals with only one potential rental flat). Effects appear to be
short lived in that most effects disappear by 2016.
13
We exclude individuals who own more than 20 flats. This constitutes less than 0.2% of our observa-
tions.
14
Figure A1 and Table A2 in Appendix A show the corresponding results for potential landlords in our
base population but outside the treatment blocks.

11

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 Figure 3: Reporting of rental income in letter groups

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and year
2014). Controls include individual fixed effects, dummies for the number of apartments, treatment block
by year dummies and additional enforcement measures related with the treatments. Vertical lines indicate
95% confidence intervals (clustering at postcode level).

12

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Figure 4: Reporting of rental income in letter groups - by reporting status before treatment

Reporting of rental income 0/1 Reporting of rental income 0/1

No reported rental income in 2014 Reported rental income in 2014
-.04 -.02 0 .02 .04 .06 .08 .1 .12

-.04 -.02 0 .02 .04 .06 .08 .1 .12

Difference to no letter group

Difference to no letter group

4

3
1 4
2
1
34
1234 3 12 12
1 1234
2 4 234 34
1
3

2013 2014 2015 2016 2013 2014 2015 2016

Tax year Tax year

Net rental income Net rental income

No reported rental income in 2014 Reported rental income in 2014
-600 -400 -200 0 200 400 600 800

-600 -400 -200 0 200 400 600 800

Difference to no letter group

Difference to no letter group

1
1
34
4 1
2 2 2 4
1234 4 34 1234 3
4 2 2
3
123 1 3
1

2013 2014 2015 2016 2013 2014 2015 2016

Tax year Tax year

Letter 1 Letter 2 Letter 3 Letter 4

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and year
2014). Controls include individual fixed effects, dummies for the number of apartments, treatment block
by year dummies and additional enforcement measures related with the treatments. Vertical lines indicate
95% confidence intervals (clustering at postcode level).

13

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Figure 5: Reporting of rental income in letter groups - by number of apartments owned before
treatment

Reporting of rental income 0/1 Reporting of rental income 0/1

1 potential rental flat 2 or more potential rental flats
.06

.06
Difference to no letter group

Difference to no letter group

.04

.04
4
2
3
.02

.02
1
2 4
1 4
1234 2 1234 3 1
0

0
1 2
3 1 34
234 34 1 2
-.02

-.02
-.04

-.04
2013 2014 2015 2016 2013 2014 2015 2016
Tax year Tax year

Net rental income Net rental income

1 potential rental flat 2 or more potential rental flats
1000

500 1000 1500

Difference to no letter group

Difference to no letter group

500

1
1 4 2
123 1
4 1234 1234 34
0

23 3
1 4
1234 2
0

4 3
-500

-500

2
-1000
-1000

2013 2014 2015 2016 2013 2014 2015 2016

Tax year Tax year

Letter 1 Letter 2 Letter 3 Letter 4

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and year
2014). Controls include individual fixed effects, dummies for the number of apartments, treatment block
by year dummies and additional enforcement measures related with the treatments. Vertical lines indicate
95% confidence intervals (clustering at postcode level).

We next turn to discuss the magnitude and the interpretation of the results in more
detail. Table 3 shows the effects of the different treatment letters (equation (1)), on the
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reporting of rental income for tax year 2015 (Panel A) and on the net rental income (Panel
B). The table shows separately the effects of all four treatment letters (βj coefficients
from equation 1). The first column shows the results for all potential landlords. In the
other columns, we divide the sample into two subgroups based on whether the individual
reported any rental income in tax year 2014 or not, as well as based on the number of
potential rental flats owned.15
The first column shows that all letters caused a statistically significant increase in the
propensity to report. Letter (2) providing information on reporting procedures and re-
quirements on rental income increased compliance, which suggests that outright mistakes
may play a role in non-compliance. Letter (4), the strongest treatment, which notified po-
tential landlords of the use of third-party information in tax enforcement, had the largest
effect. The effect of letter (4) is to increase the compliance rate by about 3.0%-points,
which amounts to a relative effect of 4.0% compared to the baseline compliance rate of
74.5%.
The second column shows the results for individuals who did not report any rental
income in tax year 2014. While some of these individuals may indeed not have owned or
rented out a flat in the previous year, this is nevertheless a subgroup where non-compliance
appears more likely. Indeed, the baseline compliance rate (at the extensive margin) in the
control block in tax year 2015 in this subgroup is only about 15%.
The effects on the treatment letters on the propensity to report are now much stronger
than in the first column. Given the low baseline compliance rate in this subgroup, the
relative effect on the compliance rate of intensified enforcement is very large: receiving
letter (4) causes an over 50% increase in the propensity to report rental income in this
group.
For those who reported rental income in 2014 (the third column), the baseline com-
pliance rate is as high as 97.5%, implying that almost all of those who reported rental
income in tax year 2014 continue to do so in tax year 2015. Nevertheless, letters (3) and
(4) clearly had a positive effect on the propensity to report also in this group.
Finally, the fourth and fifth columns show that the effects are large for potential
landlords who own only one potential rental flat.
All in all, the results concerning the direct effects on reporting behavior indicate that
especially the treatment letter containing both information on intensified enforcement and
the use of third-party information had a positive effect on the propensity to report, and
15
In Appendix A, Table A3 shows the estimation results for reporting behaviour in 2015 separately
for reported gross rental income and deductions. In addition, Table A4 shows the results on by age and
gender.

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on the reported amount of rental income. The effects are very strong for the subgroup
of potential landlords who did not report any rental income in the year prior to the
experiment, as well as potential landlords owning only one potential rental flat.

Table 3: Effects of treatment letters on reporting of rental income.

2 or more
Did not report Reported 1 potential potential
Sample All in 2014 in 2014 rental flat rental flats

Panel A: Reporting rental income (0/1)

Letter 1 0.0115** 0.0317** 0.00501 0.0153** -0.00902
[0.00578] [0.0154] [0.00387] [0.00652] [0.0111]
Letter 2 0.0232*** 0.0622*** 0.00838** 0.0285*** -0.00276
[0.00587] [0.0155] [0.00410] [0.00689] [0.0107]
Letter 3 0.0183*** 0.0436*** 0.0108*** 0.0218*** -0.000481
[0.00395] [0.0113] [0.00287] [0.00471] [0.00764]
Letter 4 0.0294*** 0.0824*** 0.0120*** 0.0340*** 0.0027
[0.00376] [0.00944] [0.00238] [0.00444] [0.00702]

Baseline mean 0.745 0.154 0.975 0.716 0.893

Panel B: Net rental income

Letter 1 144.5 -236.6** 276.0** 74.57 496.9
[87.83] [108.1] [114.2] [83.10] [392.7]
Letter 2 68.11 27.13 77.03 90.53 -36.34
[75.33] [110.3] [89.81] [59.74] [317.8]
Letter 3 112.4* -116.9 184.3** 66.98 332.4
[66.35] [99.21] [82.01] [55.76] [274.9]
Letter 4 162.1*** 142 175.0*** 141.1*** 272.2
[48.78] [135.4] [56.23] [43.62] [214.2]

Baseline mean 4366.6 526 5858.3 3025.5 11149.9

N 172950 45775 127175 144613 28337

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from tax
years 2014 (before treatment) and 2015 (after treatment). Controls include individual fixed effects, treat-
ment block by year dummies, dummies for the number of apartments owned and additional enforcement
measures related to the treatment letters. Standard errors clustered at postcode area level (263 clusters)
are in brackets. Significance is denoted by asterisks: * p < 0.1, ** p < 0.05, *** p < 0.01. Bold font
indicates significant difference at 5% level relative to letter 1.

We next move from the immediate effects of the experiment, to analyze effects in
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2016. Any effects found in later years may incorporate both reporting and real responses
to more intense tax enforcement, as landlords will have had the opportunity to adjust
their real estate holdings. For example, scaling down on real estate holdings may be an
optimal response to a perceived increase in the effective tax rate on rental income, caused
by a perceived increase in the intensity of tax enforcement.
Figure 6 shows the effect of the treatment letters on housing transactions. In this
case, the first treatment year is 2016, since the letters were sent in spring 2016. The
figure indicates that the letters did not affect housing transactions of potential landlords.

Figure 6: Housing transactions in letter groups

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and year
2014). Controls include individual fixed effects, treatment block by year dummies and additional enforce-
ment measures related with the treatments. Vertical lines indicate 95% confidence intervals (clustering
at postcode level).

The results regarding the reporting of rental income for tax year 2016 (i.e. reporting
in spring 2017) are shown in Table 4. As the first two columns of the table show, there
are no effects on the propensity to report (the extensive margin effect), or on the reported
net rental income (the intensive margin effect). This result was visible already in Figure

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3. The third and fourth column show that there are no effects on the apartments bought
and sold. Therefore, the results on the reporting behaviour for tax year 2016 cannot be
explained by individuals opting out from the rental market as a result of the treatment.
These findings suggest that the impact of the letters on reporting are diluted over time.

Table 4: Effects of treatment letters two years after.

Reporting rental Net Rental Apartments Apartments

Dep. Var. income (0/1) income bought sold

Letter 1 0.00422 3.623 -0.0114 -0.00377

[0.00597] [151.3] [0.00717] [0.00620]
Letter 2 0.00682 -100.5 0.00108 0.00334
[0.00516] [108.4] [0.00717] [0.00757]
Letter 3 -0.00427 73.92 -0.00271 0.00127
[0.00412] [207.0] [0.00593] [0.00605]
Letter 4 0.00709* -41.26 -0.00704 -0.00044
[0.00422] [88.63] [0.00476] [0.00352]

Baseline mean 0.767 8804.8 0.0836 0.0825

N 172932 172932 170197 170197

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from
tax years 2014 (before treatment) and 2016 (after treatment). Controls include individual fixed effects,
treatment block by year dummies, dummies for the number of apartments owned (only columns 1 and
2) and additional enforcement measures related to the treatment letters. Standard errors clustered at
postcode area level (263 clusters) are in brackets. Significance is denoted by asterisks: * p < 0.1, **
p < 0.05, *** p < 0.01. Bold font indicates significant difference at 5% level relative to letter 1.

4.2 Spillovers
In previous literature, tax enforcement spillovers have been found in situations where
individuals or firms operate in close proximity to each other (e.g. in the same local area,
or in the same workplace), or when they interact through social networks (e.g. family).
In our context, interactions that are conducive for the formation of enforcement spillovers
arise quite naturally. Rental housing is a type of asset that is quite often co-owned by
several owners, and one may expect co-owners to exchange information on factors that
affect the profitability of the investment. Information about tax enforcement measures
is therefore likely to spread within ownership networks. A particular type of ownership
network is one where co-owners live within the same household, i.e. co-owning spouses.

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Further, the effects of tax enforcement may also be mediated through market interaction,
when the asset that we study is exchanged in the marketplace.
Tax enforcement spillovers may therefore arise in our setting through at least two
different mechanisms - information spillovers and market interaction - which we discuss
in turn below.
First, there may be information spillovers between landlords: letter recipients may
tell other landlords about the contents of the letter. We are able to take into account
information spillovers via three channels: spillovers within ownership networks of indi-
viduals who own potential rental flats together but live in different households; spillovers
within the household; as well as between landlords who own flats in the same local area.
The latter type of channel is similar to general geographical spillovers examined in earlier
literature. Hearing about the letters may affect those other landlords’ perceived prob-
ability that evasion is detected, and therefore reporting behaviour beyond the original
letter recipient. Further, any potential change in the perceived probability of detection
may affect the effective tax rate (for non-compliant individuals), and hence the returns
to the investment into rental housing, which may turn the informational spillover into a
real spillover effect on the number of flats owned.
The direction of the informational spillover - how does second-hand information on the
letters affect the perceived probability of detection - is an open question, and may differ
across the letters and the different spillover channels. Receiving a signal about increased
general intensity of enforcement (esp. letter 3) is likely to reinforce the direct effect of
the letters. On the other hand, letter 4 provides a specific signal on the information held
by the tax administration about rental flats owned by the recipient. While this is the
strongest tax enforcement treatment in our experiment and may lead to the strongest
(positive) spillovers, it is also possible that a landlord interprets not receiving a letter as a
signal that the tax authority lacks such information in his/her case. In the latter case, a
potential spillover may run counter to the direct effect. Further, an additional mechanism
may arise within the household: even though tax liability is determined at the individual
level, some spouses may have mistakenly reported their jointly owned rental apartments
only on one spouse’s tax return.16 If this is the case, receiving a letter may alert them to
the fact that both spouses should report their rental income separately according to their
ownership share, which may cause negative reporting spillovers within the household.
16
While tax liability for the vast majority of tax items is determined at the individual level, there are
some exceptions to this rule in the tax code, e.g. some deductions that may be claimed / reported by one
spouse, but used by both if the total deduction is larger than an individual’s personal allowance. Such
exceptions may cause confusion regarding reporting obligations on other items.

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 Second, beyond information effects, additional spillovers may arise quite naturally
in our setting through market interaction. This type of spillover is dependent on the
existence of (direct) real effects from tax enforcement. For example, if a letter recipient is
induced to sell their apartment(s), those apartments will be bought by someone else, thus
naturally causing a spillover effect in flat ownership. Further, to the extent that changes
in perceived effective tax rates caused by the letters are reflected in market prices (rents
or selling/buying bids), this would give rise to additional spillovers on other potential
landlords, mediated through housing markets. Given that we do not find significant
direct effects on real behaviour, any spillover effects that we find are more likely to arise
through information effects.
How is the need to identify potential spillovers taken into account in our experimental
design? The base population in our study is constructed in such a way that we are able to
examine potential spillovers within the household as well as within the ownership networks
of other individuals who own potential rental flats together; please see the Section on
experimental design for details. Further, the randomized block design similar to Crépon
et al. (2013) enables us to analyze spillover effects from intensified enforcement across
landlords within local rental markets.
Figure 7 and Figure 8 first show the effect on reporting behaviour within the ownership
networks and within households.

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 Figure 7: Reporting spillovers in ownership network

Notes: Data includes people who owned apartments together with people in our main estimation sample
(spouses excluded). Figures show regression coefficients on co-owner’s treatment letter by year dummies
(ref. no letter and year 2014). Controls include individual fixed effects, dummies for the number of
apartments and additional enforcement measures related with the treatments. Vertical lines indicate
95% confidence intervals (clustering at postcode level).

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 Figure 8: Reporting spillovers within household

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and year
2014). Controls include individual fixed effects, dummies for the number of apartments, treatment block
by year dummies and additional enforcement measures related with the treatments. Vertical lines indicate
95% confidence intervals (clustering at postcode level).

Table 5 shows the proportions of people potentially exposed to different treatments

through their co-owners.

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 Table 5: Treatment spillovers in ownership network.

Proportion

Co-owner recieved:
No letter 0.639855
Letter 1 0.048378
Letter 2 0.049624
Letter 3 0.09309
Letter 4 0.173769

Notes: Data includes people who owned apartments together with people in our main estimation sample
(spouses excluded). Table shows the proportions of people potentially exposed to different treatments
through their co-owners.

Table 6 shows the effect on the reporting behaviour in 2015. In the first and second
columns we look at individuals who owned apartments together with potential landlords
in our main estimation sample (excluding spouses). In the third and fourth columns we
look at spouses of the potential landlords in our main estimation sample.
In Table 7 we aim to quantify the size of the spillovers. The table reports the estimated
number of additional rental income tax reports due to the direct effect on recipients of
the letters and the indirect effect on their co-owners. While the point estimates of the
spillovers effects on co-owners are of the same order of magnitude as the direct effects of
the letters, not all landlords are part of a co-ownership network. The Table indicates that
the size of the spillover effect (measured by the number of additional rental income tax
reports) is 20% of direct effect.
Finally, we utilize the block design in order to analyze enforcement spillovers between
landlords in local rental markets. As Figure 9 shows, we find no evidence of local reporting
spillovers. Nevertheless, utilizing a block design that allows us to examine and control for
potential regional spillovers, has the important benefit that we can be confident that the
estimates of the direct effects are not biased by potential spillovers.

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 Table 6: Spillovers in ownership network and household.

Co-owners Spouses
Reporting rental Net Rental Reporting rental Net Rental
Dep. Var. income (0/1) income income (0/1) income

Letter 1 0.00782 233.5* 0.000315 -5.059

[0.0127] [138.0] [0.00771] [85.81]
Letter 2 0.014 -19.13 -0.0131** -35.19
[0.0135] [92.85] [0.00634] [78.13]
Letter 3 0.0189* 96.01 0.00634 3.809
[0.00983] [66.46] [0.00553] [91.59]
Letter 4 0.0252*** 0.212 0.00422 33.9
[0.00782] [67.07] [0.00402] [69.72]

Baseline mean 0.395 1669 0.617 2665.5

N 40928 40928 75658 75658

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from tax
years 2014 (before treatment) and 2015 (after treatment). Co-owners in columns 1 and 2 include people
who owned apartments together with people in our main estimation sample (spouses excluded). Controls
include individual fixed effects, treatment block by year dummies, dummies for the number of apartments
owned and additional enforcement measures related to the treatment letters. Standard errors clustered
at postcode area level (263 clusters) are in brackets. Significance is denoted by asterisks: * p < 0.1, **
p < 0.05, *** p < 0.01. Bold font indicates significant difference at 5% level relative to letter 1.

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 Table 7: The impact of spillovers in ownership network on the number of reports.

Letter 1 Letter 2 Letter 3 Letter 4 Total

Number of recipients 4215 4122 7594 15173

Coef. (Table 3) 0.0115 0.0232 0.0183 0.0294
Effect on the number of reports 48.47 95.63 138.97 446.09 729.16

Co-owners of recipeints 990 1015 1905 3556

Coef. (Table 6) 0.00782 0.014 0.0189 0.0252
Effect on the number of reports 7.74 14.21 36.00 89.61 147.57

Spillover effect/direct effect 0.160 0.149 0.259 0.201 0.202

Notes: The table reports the estimated number of additional rental income tax reports due to the direct
effect on recipients of the letters and the indirect effect on their co-owners. The estimate for the impact
of each letter on the number of reports is obtained by multiplying the number of recipients of each letter
type (or the number of their co-owners) with the regression estimate for the impact of the letter on the
propensity to report

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 Figure 9: Reporting spillovers in the local rental market

Notes: Figures show regression coefficients on treatment area by year dummies (ref. control area and
year 2014). Controls include individual fixed effects, dummies for the number of apartments, treatment
letter by year dummies and additional enforcement measures related with the treatments. Vertical lines
indicate 95% confidence intervals (clustering at postcode level).

5 Conclusion
We have reported the results from a large-scale randomized field experiment focusing on
rental income tax compliance. The experiment was conducted in spring 2016 and our data
covers two years of reporting behavior (spring 2016 and 2017) combined with a rich set of
other tax related information about potential landlords. This enables us to analyze the
effects of the treatment on the immediate reporting behavior of potential landlords, as well
as the behavior one year after the treatment. To distinguish between potential reasons
for non-compliance, we examine both the effects of providing simplifying information on
tax filing practices, as well as notifying landlords of intensified tax enforcement and the
use of third-party information by the tax authority.
Our findings show that different types of treatment letters had an effect on the report-

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ing behavior of potential landlords. The effect is most pronounced at the extensive margin
(that is, the propensity to report any rental income) while we also find some effects on the
intensive margin (that is, the euro amount of rental income reported). We find that some
potential landlords respond to the letter providing simplifying information on tax-filing
practices, suggesting that outright mistakes may play a role in non-compliance. However,
the strongest effects are found for the treatment letter that notified potential landlords of
the use of third-party information on the ownership of apartments in tax enforcement.
We find largest effects for individuals who had reported no rental income in the year
prior to treatment: the strongest treatment, providing information on the use of third-
party information in tax enforcement, increased the propensity to report rental income in
this group by over 50%. Effects are particularly pronounced also for small-scale renters,
i.e. individuals who owned only one potential rental apartment.
Our experimental design also allows for studying three types of reporting spillovers
from enforcement information. We have utilized a randomized block design where the
intensity of treatment varies between postcode areas, which allows us to analyze local
reporting spillovers. We do not find clear evidence of spillovers in reporting behavior
between landlords within local rental markets.
We also analyze reporting spillovers within ownership networks, as well as within the
household. We find evidence of positive reporting spillovers between co-owners. The
positive effects of intensified enforcement on tax reporting may be understated if spillover
effects are ignored.
Finally, our data allows us to examine effects on the portfolio choice of potential
landlords. Intensified enforcement may lead to a higher effective tax rate, and hence
lower returns to investment in rental housing. However, we do not find evidence of effects
on apartments bought and sold in the year following the treatment.

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Appendix

A Additional tables and figures

Table A1: Summary statistics for key variables 2014-2016.

1st 99th
Obs Mean Std.Dev. Median percentile percentile

Reported rental income (0/1) 259881 0.774 0.418 1 0 1

Gross rental income 259881 8794 22719 5868 0 63840
Net rental income 259881 4811 13217 2942 -1893 37273.17
Spouse reported rental income (0/1) 159669 0.442 0.497 0 0 1
HH Gross rental income 259881 11142 29849 6984 0 80566
HH Net rental income 259881 6091 17697 3689 -2367 47137
Owned apartments 259881 2.306 2.409 2 0 11
Potential rental apartments 259881 1.271 0.827 1 1 5

Notes: Table shows summary statistics for individuals in our control and treatment blocks and their
spouses for tax years 2014-2016.

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Figure A1: Reporting of rental income in letter groups - areas not included in the block design

Notes: Figures show regression coefficients on treatment letter by year dummies (ref. no letter and
year 2014). Controls include individual fixed effects, dummies for the number of apartments and addi-
tional enforcement measures related with the treatments. Vertical lines indicate 95% confidence intervals
(clustering at postcode level).

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 Table A2: Effects of treatment letter in areas outside the block design.

Reporting rental Net rental

Dep. Var. income (0/1) income

Letter 1 0.0246*** 22.55

[0.00543] [63.39]
Letter 2 0.0431*** 31.49
[0.00541] [58.03]
Letter 3 0.0262** -37.47
[0.0106] [89.73]
Letter 4 0.0284*** -93.47
[0.00738] [76.70]

Baseline mean 0.714 3314.1

N 83825 83825

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from
tax years 2014 (before treatment) and 2015 (after treatment). Controls include individual fixed effects,
dummies for the number of apartments owned and additional enforcement measures related to the treat-
ment letters. Standard errors clustered at postcode area level (263 clusters) are in brackets. Significance
is denoted by asterisks: * p < 0.1, ** p < 0.05, *** p < 0.01. Bold font indicates significant difference at
5% level relative to letter 1.

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 Table A3: Effects of treatment letters on gross and net rental income and deductions.

Gross rental income Deductions Net rental income

Letter 1 166.5 21.98 144.5

[178.8] [151.5] [87.83]
Letter 2 59.51 -8.6 68.11
[92.80] [75.81] [75.33]
Letter 3 132.5* 20.02 112.4*
[70.78] [74.26] [66.35]
Letter 4 178.9 16.81 162.1***
[108.6] [83.45] [48.78]

Baseline mean 8050.3 3683.8 4366.6

N 172950 172950 172950

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from
tax years 2014 (before treatment) and 2015 (after treatment). Controls include individual fixed effects,
dummies for the number of apartments owned and additional enforcement measures related to the treat-
ment letters. Standard errors clustered at postcode area level (263 clusters) are in brackets. Significance
is denoted by asterisks: * p < 0.1, ** p < 0.05, *** p < 0.01. Bold font indicates significant difference at
5% level relative to letter 1.

33

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 Table A4: Effects of treatment letters by age and gender.

Sample Age below 40 Age 40-60 Age above 60 Male Female

Panel A: Reporting rental income (0/1)

Letter 1 0.0652*** -0.00127 0.00541 0.0159** 0.00714
[0.0178] [0.00824] [0.00733] [0.00787] [0.00760]
Letter 2 0.0724*** 0.0192** 0.00822 0.0301*** 0.0170**
[0.0179] [0.00936] [0.00702] [0.00898] [0.00786]
Letter 3 0.01 0.0189** 0.0234*** 0.0291*** 0.00842
[0.0144] [0.00866] [0.00624] [0.00674] [0.00543]
Letter 4 0.0454*** 0.0307*** 0.0249*** 0.0385*** 0.0210***
[0.0116] [0.00674] [0.00449] [0.00562] [0.00520]

Baseline mean 0.664 0.755 0.768 0.752 0.739

Panel B: Net rental income

Letter 1 428.0*** 241.1 14.62 297.2* 4.749
[139.9] [179.0] [125.5] [160.5] [95.39]
Letter 2 209 -92.57 163.6 61.38 67.79
[160.3] [123.3] [115.6] [115.7] [94.77]
Letter 3 64.4 251.4** 66.28 254.5** -14.2
[137.1] [116.2] [103.2] [111.2] [78.81]
Letter 4 243.6** 356.1*** 25.42 255.1*** 79.44
[103.1] [128.2] [63.34] [88.05] [56.86]

Baseline mean 3699.2 4377.2 4616.4 4884 3886.1

N 29720 65163 78067 82066 90884

Notes: Table shows DiD estimates for the effects of treatment letters (ref. no letter) using data from tax
years 2014 (before treatment) and 2015 (after treatment). Controls include individual fixed effects, treat-
ment block by year dummies, dummies for the number of apartments owned and additional enforcement
measures related to the treatment letters. Standard errors clustered at postcode area level (263 clusters)
are in brackets. Significance is denoted by asterisks: * p < 0.1, ** p < 0.05, *** p < 0.01. Bold font
indicates significant difference at 5% level relative to letter 1.

34

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B Rental income form and treatment letters

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Letter 1

VERO SKATT

NOTICE

Finnish Tax Administration PO Box 325 FI-

00052 Vero, Finland

Ref.

Check your pre-completed tax return

You have received a pre-completed tax return containing information on your

earnings and deductions in 2015. Review the tax return with care. If the information
is correct and nothing is missing, you need not do anything. If the information is
incorrect, or some pieces of information are missing, you must correct or
supplement the tax return. Information to be supplemented may include rental
income, travel expenses between your home and place of work, or tax credit for
household expenses, for example.

You can supplement and correct the information in the pre-completed tax return in
the Tax return online service (vero.fi/veroilmoitus). The service will remain open
until the tax return deadline indicated on your tax return. If you supplement your tax
return online, you need not use the tax return form or its appendix forms.

If you use a paper form to submit your tax return by regular post, you must also
send the required appendix forms. For example, you must use form 7H to
announce your rental income from a unit in a housing company and form 14A to
get your tax credit for household expenses. The required appendix forms are listed
in the instructions on how to complete the tax return. Don’t forget to enter the
required pieces of information in the correct part of the tax return form in addition to
the appendix forms.

For more information, please visit vero.fi/henkilöasiakkaat > Veroilmoitus

(Individual taxpayers > Tax return) or call the service number specified in your pre-
completed tax return.

Finnish Tax Administration

VATT_1 1.2016 vero.fi

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Letter 2

VERO SKATT
NOTICE
Finnish Tax Administration PO Box 325 FI-
00052 Vero, Finland

Ref.

Check your pre-completed tax return

You have received a pre-completed tax return containing information on your earnings and
deductions in 2015. Review the tax return with care. If the information is correct and nothing
is missing, you need not do anything. If the information is incorrect, or some pieces of
information are missing, you must correct or supplement the tax return. Information to be
supplemented may include rental income, travel expenses between your home and place of
work, or tax credit for household expenses, for example.

If you received rental income in 2015, announce the rental income and related expenses.
The most common expenses to be deducted from rental income include maintenance
charges, annual repair costs and real estate tax. If you received rental income from several
sources (such as a unit in a housing company and a summer home), you must separately
announce the income and expenses of each property. If you own a unit in a housing
company with another person, you must only announce the share of rental income and
expenses corresponding to your share of ownership. Calculate the amount of taxable rental
income by deducting the expenses from the rental income.

Example of calculating rental income

The taxpayer owns one unit in a housing company, which they rented out for the entire year
of 2015, with the rent being EUR 1,000 per month. The taxpayer/landlord paid a
maintenance charge of EUR 250 per month. Other expenses related to the renting of the
apartment totalled EUR 1,500. The taxable rental income is the difference between the
rental income and expenses, or 12 x EUR 1,000 - 12 x EUR 250 - EUR 1,500 = EUR 7,500.
Hence, the taxable rental income is EUR 7,500.

You can supplement and correct the information in the pre-completed tax return in the Tax
return online service (vero.fi/veroilmoitus). The service will remain open until the tax return
deadline indicated on your tax return. If you supplement your tax return online, you need not
use the tax return form or its appendix forms.

If you use a paper form to submit your tax return by regular post, you must also send the
required appendix forms. For example, you must use form 7H to announce your rental
income from a unit in a housing company and form 14A to get your tax credit for household
expenses. The required appendix forms are listed in the instructions on how to complete the
tax return. Don’t forget to enter the required pieces of information in the correct part of the
tax return form in addition to the appendix forms.

For more information, please visit vero.fi/henkilöasiakkaat > Veroilmoitus (Individual

taxpayers > Tax return) or call the service number specified in your pre-completed tax
return.

Finnish Tax Administration

VATT_2 1.2016 vero.fi

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Letter 3

VERO SKATT NOTICE

Finnish Tax Administration

PO Box 325
FI-00052 Vero, Finland

Ref.

Check your pre-completed tax return

You have received a pre-completed tax return containing information on your

earnings and deductions in 2015. Review the tax return with care. If the information
is correct and nothing is missing, you need not do anything. If the information is
incorrect, or some pieces of information are missing, you must correct or
supplement the tax return. Information to be supplemented may include rental
income, travel expenses between your home and place of work, or tax credit for
household expenses, for example.

The Finnish Tax Administration is boosting the monitoring of tax to be paid

for rental income. Hence, additional information on rental income and related
expenses will be requested more often than before. The additional information
is needed for the Tax Administration to verify that the rental income and expenses
specified in your tax return are correct.

If you received rental income in 2015, you must announce all rental income you
received and related expenses. If necessary, the Tax Administration can request
receipts or other additional information on your rental income and expenses. If we
need additional information on your rental income, you will receive a request to
supplement your tax return after the tax return deadline. Do not enclose your
receipts with your tax return, however; the Tax Administration will separately
request them if necessary.

You can supplement and correct the information in the pre-completed tax return in
the Tax return online service (vero.fi/veroilmoitus). The service will remain open
until the tax return deadline indicated on your tax return. If you supplement your tax
return online, you need not use the tax return form or its appendix forms.

If you use a paper form to submit your tax return by regular post, you must also
send the required appendix forms. For example, you must use form 7H to
announce your rental income from a unit in a housing company and form 14A to
get your tax credit for household expenses. The required appendix forms are listed
in the instructions on how to complete the tax return. Don’t forget to enter the
required pieces of information in the correct part of the tax return form in addition to
the appendix forms.

For more information, please visit vero.fi/henkilöasiakkaat > Veroilmoitus

(Individual taxpayers > Tax return) or call the service number specified in your pre-
completed tax return.

Finnish Tax Administration

VATT_3 1.2016 vero.fi

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Letter 4

VERO SKATT NOTICE

Finnish Tax Administration

PO Box 325
FI-00052 Vero, Finland

Ref.

Check your pre-completed tax return

You have received a pre-completed tax return containing information on your earnings and
deductions in 2015. Review the tax return with care. If the information is correct and nothing
is missing, you need not do anything. If the information is incorrect, or some pieces of
information are missing, you must correct or supplement the tax return. Information to be
supplemented may include rental income, travel expenses between your home and place of
work, or tax credit for household expenses, for example.

The Finnish Tax Administration is boosting the monitoring of tax to be paid for rental
income. Hence, additional information on rental income and related expenses will be
requested more often than before.
The additional information is needed for the Tax Administration to verify that the rental
income and expenses specified in your tax return are correct.

The rental income information for 2015 will be compared to information on landlords’
property ownership more comprehensively than before. Special attention will be paid to
tax returns where the rental income information is not consistent with the property ownership
information. According to the information available to the Tax Administration, you own at
least one unit in a housing company, and the apartment may have been rented out in 2015.

If you received rental income in 2015, you must announce all rental income you received
and related expenses. If necessary, the Tax Administration can request receipts or other
additional information on your rental income and expenses. If we need additional information
on your rental income, you will receive a request to supplement your tax return after the tax
return deadline. Do not enclose your receipts with your tax return, however; the Tax
Administration will separately request them if necessary.

You can supplement and correct the information in the pre-completed tax return in the Tax
return online service (vero.fi/veroilmoitus). The service will remain open until the tax return
deadline indicated on your tax return. If you supplement your tax return online, you need not
use the tax return form or its appendix forms.

If you use a paper form to submit your tax return by regular post, you must also send the
required appendix forms. For example, you must use form 7H to announce your rental
income from a unit in a housing company and form 14A to get your tax credit for household
expenses. The required appendix forms are listed in the instructions on how to complete the
tax return. Don’t forget to enter the required pieces of information in the correct part of the
tax return form in addition to the appendix forms.

For more information, please visit vero.fi/henkilöasiakkaat > Veroilmoitus (Individual

taxpayers > Tax return) or call the service number specified in your pre-completed tax
return.

Finnish Tax Administration

VATT_4 1.2016 vero.fi

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