Tax Decision Boosted Timber Sales In Finland, Says FFIF

by Ulrika Lomas, Tax-News.com, Brussels

22 August 2008

According to the Finnish Forest Industries Federation (FFIF), the government's recent decision to grant temporary tax relief to the lumber trade has provided a boost to the industry.

In a statement published on Thursday, the FFIF announced that:

"Domestic timber sales increased above the long-term weekly average to over half a million cubic metres in the last week of July, which was immediately after the Finnish government published its forest tax decision."

However, the Federation went on to reveal that:

"The industry managed to purchase a total of 1.8 million cubic metres of wood from privately owned forests in July, a fifth less than last June or in July 2007. The aggregate purchase volume for January-July of this year is 12.2 million cubic metres, a little over half of the corresponding figure for the previous year. Timber sales usually quiet down during the summer holidays."

In a public statement released in late July, Finland's Minister for Foreign Trade and Development, Paavo Väyrynen, defended the government's temporary tax relief plan for the lumber trade.

The tax relief was granted as a result of a long-running disagreement between Finland and Russia which was initially sparked when Russia announced plans to increase export duties on lumber by EUR50 per cubic metre by 2009.

This prompted a strong reaction from Finland, whose paper producers buy the majority of their lumber imports from Russia, and were facing the prospect of paying double the price for their materials.

Mr Väyrynen justified Finland's use of reliefs rather than refunds, explaining that:

"Because of the delays to find a solution to the Russian lumber tariff issue, Finland has had to consider all possible solutions in order to ensure sufficient supplies for the industry."

"A temporary tax relief for lumber sales is clearly a better alternative than granting refunds of tariffs to the industry. The refunds would enable the continuity of the imports from Russia even after the higher export tariffs enter into force, whereas tax reliefs increase the use of Finnish lumber which benefits the Finnish economy and employment."

The Finance Minister concluded: "The Finnish Government aims at replacing the imported lumber with Finnish lumber as much as possible and on a sustainable basis. A long-term replacement of the Russian birch fiber with Finnish lumber is not possible, but this can possibly replace the Russian lumber during a year or two. We should especially get more birch fiber to the market at the moment.”

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