Minister of Finance Riikka Purra at the government’s budget framework negotiations press conference at the Government Palace briefing room in Helsinki on 23 April 2025. Photo: Jussi Nukari / Lehtikuva
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Finland’s government will reduce the country’s highest marginal tax rate from nearly 60 percent to 52 percent starting next year. The decision, finalised during the mid-term budget session, will bring an estimated €335 million in relief to the top income group.
The changes are part of a broader package of income tax cuts worth nearly €1 billion. Of this, €525 million will go to low- and middle-income earners in 2026, with a further €650 million in 2027.
According to the Ministry of Finance, the marginal tax cut will begin to affect those earning over €58,000 annually. For individuals making over €98,000 a year, the tax reduction is more significant. For example, those earning around €100,000 will see their marginal tax rate drop from approximately 59 percent to 52 percent, translating to about €3,000 in annual tax savings.
The government defines marginal tax as the share of each additional euro of income taken in taxes. The reform targets high earners by increasing their take-home share of any income increases.
Taxpayer Association estimates indicate that those earning above €100,000 annually will see the greatest financial benefit from the reform. The impact for those with incomes below €58,000 will be minimal. Individuals earning €4,640 per month or less will not see any additional take-home income from the marginal rate change.
Prime Minister Petteri Orpo’s coalition stated the goal of the reform is to incentivise work, stimulate spending, and support long-term economic growth.
“The idea is that cutting the top tax rates strengthens motivation to work and reduces the economic disincentives for professionals to stay in Finland,” said Finance Minister Riikka Purra during the press briefing.
The government argues that Finland’s highest marginal rates have been high by European standards and believes a lower ceiling will make the country more competitive.
The reform comes amid broader changes to income and corporate tax policy. The government will also lower the corporate tax rate from 20 percent to 18 percent from 2027, part of its pro-business agenda. In addition, the top inheritance tax threshold will rise from €20,000 to €30,000, while food VAT will drop from 14 percent to 13.5 percent.
The government has said the revenue loss from tax cuts will be partly offset by eliminating tax deductions for union membership fees, raising excise taxes on sugary drinks and nicotine products, and tightening regulation around share-based tax planning schemes.
Opposition parties criticised the measures, saying the reforms favour the wealthy and will worsen inequality. Several MPs described the package as a “giveaway for the rich,” noting the simultaneous cuts to education and development aid.
The Ministry of Finance said that around 30 percent of the tax cuts will benefit high-income earners, while the remaining 70 percent is aimed at low- and middle-income groups. Analysts said the long-term effects on employment and economic growth remain uncertain.
HT
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Source: www.helsinkitimes.fi
