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Banks’ lending decisions will be based on TCB data on applicants’ real income

9 October 2018


The Tax and Customs Board (TCB) and the Estonian Banking Association agreed to automate requests for data on the official information of private persons’ wages submitted to the Tax and Customs Board, which will be taken into account by banks when granting a loan. In future, loan applicants can provide the information of their official wages in the internet bank when filling out their loan application.                   

According to Valdur Laid, Director-General of TCB, the cooperation between the tax authority and banks helps to inform people whether their labour taxes have been paid. „It is especially important for young people who enter the labour market and wish to apply for a loan over the coming years. If they receive undeclared, i.e. “envelope” wages and apply for a loan later on, banks may refuse to grant them a loan,” Laid explained.     

„Although the level of discontent with envelope wages has never been so high, the percentage of recipients of undeclared wages has still not decreased. If lending decisions are made on the basis of official wages, the percentage of undeclared wages will surely decrease,” Laid added.

„Resulting from the Creditors and Credit Intermediaries Act and the principle of responsible lending, banks are required to verify the information submitted by clients on their income and obligations,” Erki Kilu, Chairman of the Estonian Banking Association explained. „Banks analyse various data when evaluating their clients’ creditworthiness. Loan applicants can submit a certificate of income issued by TCB today as well, but through non-automated means. Automatic requests for data from TCB will enable banks to verify more easily the information their clients have submitted on their income and reduce the need to issue bank statements.”

It is intended to integrate the submission of tax information to banks into the whole process of loan agreement application, where persons themselves give their consent to use their tax information for the purpose of making lending decisions. The detailed technical solution is about to be completed, first banks are ready for the automated receipt of tax data as from 2019.  

TCB aims to reduce the percentage of the receivers of envelope wages by half by 2021.

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