The National Tax Investigation Police (SR) (Icelandic: Skattrannsóknarstjóri Ríkisins), also known as the Directorate of Tax Investigations in Iceland, is one of Iceland’s three intelligence agencies. The SR is responsible for investigating legal cases where suspicions of tax fraud, tax evasion, or other violations of tax law are found within Iceland. The SR is accountable to the Icelandic Minister of Finance, Benedikt Jóhannesson.
History and organization
The SR was founded in 1993 with the goal of functioning as a specialized and autonomous intelligence agency focused specifically on the tax system. The director of the SR is appointed by, and responsible only to, the Minister of Finance. While the central SR office is located in Reykjavík, the office still investigates all alleged tax crimes in all of Iceland’s nine tax districts of Reykjavík, Akranes, Ísafjörður, Siglufjörður, Akureyri, Egilsstaðir, Hella, Vestmannaeyjar and Hafnarfjörður. The SR operates under Icelandic regulation and law nos. 361/1995, 50/1988, 45/1987, 113/1990, 145/1994, 144/1990, and 37/1993.
The SR has 24 employees, most of whom have university degrees in business, economics, or law. In 2006 the SR’s allotted budget was ISK 155m or ~$2.2m USD. The SR submits an annual budget to the Ministry of Finance by February 15 each year. The report includes a report on the SR’ operations and activities as well as a balance sheet for the previous year.
- Investigate all cases where there is a suspected presence of tax fraud.
- To represent the state of Iceland in legal cases in which a penalty procedure is conducted through a closed administrative action by the State Internal Revenue Board.
- The preparation of major cases for criminal proceedings, and for further investigation by both the National Commissioner of the Icelandic Police and the Directorate of Public Prosecutions.
There are two objectives of SR investigations:
- Conclusions of SR investigations must be a basis for tax assessment.
- Conclusions of SR investigations must serve as a basis for possible criminal proceedings.
The SR is tasked with investigating violations of all Icelandic tax laws levied or enforced by the Directorate of Internal Revenue, and violations of the Accounting Act and Financial Statements Act. Any other activities fall outside the SR’ scope of authority. Once a tax investigation case has concluded, the SR decides whether or not criminal proceedings are initiated. If criminal proceedings are initiated, they may proceed in three manners. The taxpayer is fined an amount deemed necessary by the SR, the SR presents a payment claim before the State Internal Revenue Board, or the case is referred to the Icelandic Police. Each year, the SR investigates ~100 tax fraud cases. Tax fraud in Iceland tends to be concentrated in the restaurant and food industries.
Relationship with district tax offices
When a district tax office finds an Icelandic taxpayer in breach of tax law after conducting their general tax control, the SR receives the case from the district tax office. Any case where there is a suspicion of possible tax fraud, it is required by law to be reported to the SR. The SR can also receive cases from state tax collectors, and the police if technical expertise is needed in accounting or fraud cases.
Since its inception, the SR has implemented major changes in how the Icelandic government combats tax crimes. Thanks to the SR’s efforts, approximately ISK 4 billion or ~$58 million USD has been collected as a direct result of SR’s proceedings over the “past several years”.
2015 Tax evasion case
In 2015, the SR released a statement that a whistle blower who had offered them data and documents relating to tax evasion by people linked to Iceland requested ISK 150 million (~$1.1 million USD). The information in question was a large leak of sensitive information reportedly showing that The Hongkong and Shanghai Banking Corporation (HSBC) had assisted clients worldwide in tax evasion. The SR had initially requested government support to pay for the data, however former Minister of Finance Bjanri Benediktsson later stated that the SR would only pay for the data if the fee was in proportion to the collected tax from the accounts in question. One of the six individuals in the SR’s investigation is an Icelandic passport holder, while the other 5 have other ties to the country.