The Estonian Tax and Customs Board (MTA) and the Estonian Banking Association have reached an agreement according to which data queries on official wage information reported to the MTA by individuals will be automated and this information taken into account when issuing loans.
Banks to begin taking reported wage data into account in issuing loans
In the future, loan applicants can submit information regarding their reported wages directly from online banking as they fill out their loan application.
According to MTA Director General Valdur Laid, this cooperation between the MTA and banks will help direct people's attention to whether their labour taxes have been paid.
"This is especially important in the case of young people who have recently joined the labour market and wish to apply for a loan in the next few years, who may say yes to envelope wages now and then be denied when seeking a loan from the bank later," Laid said.
"Satisfaction with envelope wages has never been so high before," he continued. "The proportion of those accepting envelope wages surely hasn't decreased. If reported wages are also taken into account in issuing loans, this will surely help decrease envelope wages on the whole."
"Based on the Creditors and Credit Intermediaries Act and the principles of responsible lending, banks are required to verify client-submitted information regarding their incomes and obligations," explained Estonian Banking Association board chairman Erki Kilu.
According to Kilu, when assessing a client's creditworthiness, banks take various information into account, and it is currently already possible — but not automated — to submit a certificate issued by the MTA regarding one's income.
"The automation of data queries with the MTA will provide banks with the opportunity to more easily verify clients' self-reported income information and decrease the necessity of clients having to submit bank statements," he said.
The plan is to make the submission of tax data to the bank part of the loan application process, with clients themselves granting permission to use their tax data in the loan decision process. The necessary technical solution is currently in development; the first banks will begin accepting tax data submitted this way beginning next year.
The MTA's goal is to halve the proportion of recipients of envelope wages by 2021.