Available Funds Fraud - A Systematic Use of Sluggishness in the Charge and Tax System Which Results in Accumulation of Debts to the State That Are Cancelled Through Bankruptcy (From Ekonomisk Brottslighet, P 105-112, 1979, Leif Johansson and Dan Magnusson, eds. - See NCJ-79655)

• NCJ Number: 79660
• Author(s): L Bjerkner
• Date Published: 1979
• Length: 8 pages
• Sale Source: Brottsforebyggande Radet
• Country: Sweden
• Note: *This document is currently unavailable from NCJRS.

Annotation

An increasing type of tax evasion and bankruptcy fraud practiced among some Swedish companies is the slow payment or nonpayment of withholding and employers' taxes. The debts accumulate, the company eventually declares bankruptcy and absolves itself of the debts, and the company then reopens under another name or has its assets transferred.

Abstract

This kind of illegal practice is easily carried out and is relatively risk-free since the tax authorities do not have the resources to devote to timely detection investigation, and prosecution of nonpayment of taxes. A common pattern of this kind of white-collar crime is described. Person 'X' has controlling shares in a concern called 'Company A.' X has been convicted of failure to pay employee withholding and employers' contribution taxes and is fined 20 crowns a day for 20 days. At this point in time, X dissolves Company A and opens Company B, C, and D. Company B pays its first-quarter taxes in 1973 and than falls delinquent until the time that its debts are so large that they match or are greater than the company's available funds; Company B is thus forced into bankruptcy. Owing the Government over 1 million crowns in back taxes, Company B goes into bankruptcy proceedings in early 1976, at which time it is discovered that all of Company B's assets and personnel were absorbed by Company C in 1975. In 1976-77, Company C goes under, and it declares bankruptcy in 1978, owing taxes of over 400,000 crowns, plus a substantial amount of preliminary debts which were never paid because the company was never registered with the authorities. The inventory, accounts receivable, and work-in-progress are transferred to Company D in December 1977, and Company D begins paying employees in February. By June, Company D is 110,000 crowns in arrears for withholding and employers' taxes and has not paid the preliminary tax. For failure to pay taxes for Company B and C, X has not been sentenced to a month in prison. Obviously, the sluggishness in the tax collection system has allowed X's continued speculation with money that was owed in taxes. In addition, huge tax debts were dissolved by bankruptcy by the time a problem was detected, representing a sizable loss to the Government. Other forms of fraudulent bankruptcy are noted. No references are cited.