The OP Financial Group is one of the largest corporate tax payers in Finland. LEHTIKUVA
- Next Article Aviation union warns of strike at Finnair in May
The Finnish government is set to reduce the corporate tax rate from the current 20 percent to between 17 and 18 percent, according to that a reduction to 18 percent is the most likely outcome, although a steeper cut to 17 percent remains under consideration.
The Ministry of Finance has previously estimated that a one-percentage-point reduction in corporate tax would cost the state around €450 million annually in lost revenue under static assumptions. The government expects the actual fiscal impact to be smaller due to anticipated economic growth and increased corporate activity.
To balance the budget, the government intends to introduce offsetting spending cuts and targeted tax increases. These are intended to ensure that the tax reform does not raise the overall level of public borrowing.
Corporate tax in Finland is paid by limited companies, cooperatives, and under certain conditions, by state enterprises, associations, foundations, and housing companies. Finland’s current 20 percent rate is already lower than many European peers, but government officials argue that further cuts could help attract capital and reduce investment barriers.
Finance Minister Riikka Purra said last week that Finland suffers from low growth and a lack of economic dynamism. While noting that the existing corporate tax rate is relatively competitive, she indicated that the government sees potential in further reductions.
The last corporate tax cut in Finland took place in 2014 under the government of Jyrki Katainen, when the rate was lowered from 24.5 percent to 20 percent.
The proposed reduction has drawn support from business groups. The Confederation of Finnish Industries (EK) has called for a cut of five percentage points, arguing that the resulting economic activity would offset the decline in tax revenue.
However, independent tax research suggests that while lower corporate taxes can increase investment, the claim that they “pay for themselves” remains unlikely. A government-commissioned review found that corporate tax cuts would probably lead to some growth, but not enough to fully recover the lost revenue.
In addition to corporate tax changes, the government is expected to approve modest cuts to income taxation. Purra has said these will also be funded through spending adjustments and tax increases elsewhere.
No final decisions have been announced regarding where the offsetting measures will fall. However, according to Helsingin Sanomat, one of the proposed steps is the removal of tax deductibility for trade union membership fees. That change could generate an additional €190 million annually.
The corporate tax reform is likely to become a central pillar of the government’s broader economic agenda, which includes deregulation, reduced public spending, and increased labour market flexibility.
HT
- Next Article Aviation union warns of strike at Finnair in May
Source: www.helsinkitimes.fi
