Finnish Tax Burden Likely To Increase

by Ulrika Lomas, Tax-News.com, Brussels

15 June 2009

In line with a recent report from the Finnish Central Bank, the government has announced that it will have to increase taxation on Finnish citizens by as much as 5% in order to tackle the state’s financial situation.

Governor of the Finnish Central Bank, Erkki Liikanen underlined in a recent news conference that in order to improve the state’s finances the government may have to increase taxation, introduce retrenchment measures, or implement both, even if the economy were to begin recovering in 2011.

In response to the Central Bank, Finnish Finance Minister, Jyrki Katainen confirmed that the Central Bank’s report was statistically correct but stressed that, although the government will discuss possible measures, an austerity package would not be introduced in the short-term, instead he said that the government would err towards increasing the length of Finnish employees’ working careers in order to tackle Finland’s increasingly aging population.

Katainen added that any future hikes would not be introduced zealously, but instead underlined that the government would continue to carefully examine the effects of possible policy changes.

The Finnish Ministry of Finance has projected a budget deficit of EUR5.6bn during 2009, which is expected to further increase during the years that follow. It is likely that Finland’s tax haul across all income brackets, which currently amounts to 43% of GDP, down from 47% of GDP in 1996, will see a substantial increase in the years following a global recovery from the crisis.

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