The personnel fund system, created 35 years ago to encourage long-term investment from ordinary employees, has been exploited for large-scale tax avoidance. HS financial editor Anni Lassila deemed this practice short-sighted and foolish. In response, the taxman introduced new guidelines on March 26 that caused confusion in the industry by potentially changing decades-old taxation practices.
The complex and controversial details of these guidelines have sparked debate among experts, with some assuming that the entire performance bonus is funded while others allow employees to decide for themselves whether to fund it. The taxman’s example number three also caused confusion regarding when taxes should be paid on funded rewards, leading to misunderstandings among experts.
Concerns about the abuse of the system arise as some companies exploit loopholes to minimize taxes for high-income earners. This undermines the original purpose of personnel funds, which was to promote long-term investment among ordinary employees. Proposed solutions include enacting a reasonable maximum amount that can be invested annually, regardless of company reward systems, to address tax avoidance issues and restore the fund’s intended purpose.
The exploitation of the personnel fund system for tax avoidance threatens its existence and undermines its intended purpose of promoting long-term investment among ordinary employees. It is crucial to address these issues to protect the integrity of the system and prevent further abuse.
