Finland's 2010 Budget Proposes Changes In Taxation

by Ulrika Lomas, Tax-News.com, Brussels

18 September 2009

In a bid to boost employment, and increase purchasing power for consumers, thus stimulating domestic demand, the Finnish government has included a raft of tax measures in its 2010 Budget, designed to provide tax relief for both individuals and businesses, and to reduce the effects of fiscal drift.

Contained in the 2010 Budget are the following key tax initiatives designed to benefit individuals:

• The tax-free allowance will be raised for low-income earners.
• The government pledges to provide a guarantee for pensioners that tax rates applied to pension income do not exceed those levied on earned income.
• The tax-free sum for employer-subsidized public transport tickets will rise.
• Travel expenses may be deducted from income, as stipulated in the Income Tax Act.

Measures designed to alleviate the burden borne by businesses include the following:

• Taxpayers may opt to tax shared business income and agricultural income from a deemed partnership entirely as earned income.
• Capital gains derived from fixed assets will become exempt from tax, provided that the assets are handed to the State or State enterprise as a nature reserve.
• On a temporary basis, given the ongoing global economic crisis, surtaxes, penalty interest and interest levied on late payments will be reduced by 1% in 2010.

According to the government announcement, most of the proposed changes in taxation are due to enter into force from 2010.

Among other tax measures included in the 2010 Budget are the following initiatives:

• From March 2010, the annual vehicle tax levied on petrol vans will be replaced with a carbon dioxide emissions-based tax, in line with the basic tax on vehicles. In the absence of sufficient emissions data, vans are to be taxed according to the overall volume of the vehicle. Diesel vans are not included in the new provision.
• Certain excise duties are to change from 2010. Duties levied on cigarettes and other tobacco products are set to rise by 5%, and on loose tobacco by 15%. A duty on sweets will be introduced from July 2010, and duties on soft drinks are also to rise.
• The government is proposing a number of changes to existing VAT rates. From July 1, 2010, the standard VAT rate is to rise by 1% to 23%. The reduced VAT rate currently levied on foodstuff and fodder is also to rise by 1% to 13%. The reduced rate levied on books, medicine, cultural and sports services, passenger travel, and other services is to rise from 8% to 9%. In stark contrast, the VAT rate in the catering industry is to be significantly reduced, from 22% to 13%.

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