People shopping for groceries in Shopping Centre Sello in Espoo on 15 February 2025. YLE on 19 February reported that recent changes in value-added tax rates have had an expected impact on consumer prices: retailers have moved costs fully to consumer prices but kept some of the savings to themselves. (Emmi Korhonen – Lehtikuva)
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THE VALUE-ADDED TAX on diapers and menstrual pads was cut from 25.5 per cent to 14 per cent on 1 January.
However, the cut has not had a corresponding impact on consumer prices, suggesting that some of it has gone straight into the pockets of retailers, according to YLE. “Well, that’s what it looks like,” Kristiina Nieminen, a senior statistician at Statistics Finland, confirmed to the public broadcasting company on 19 February.
The value-added tax on a number of other products was contrastively raised at the turn of the year, with goods and services such as books, medications, bus fares, cultural services and accommodation services moving from the 10-per-cent bracket into the 14-per-cent bracket. The raise appears to have a corresponding impact on consumer prices.
Also the prices of coffee and chocolate have risen, as have those of spirits as a result of adjustments made to the excise duty.
Although the value-added tax reform has driven up consumer prices, inflation remains under control in the big picture. According to Statistics Finland, inflation came in at 0.7 per cent in January 2025, a drop of almost 2.5 percentage points from one year ago and one of roughly 7.5 points from two years ago.
Baseline inflation, which excludes highly volatile items such as food and energy, came in at 1.3 per cent in January 2025.
Inflation has stayed under control primarily due to interest rates. The European Central Bank cut its benchmark rates repeatedly last year and continued to do so this year, lowering the cost of housing loans on consumers in Finland. Nieminen reminded YLE that changes in housing costs have an immediate impact on inflation given the share they account for total spending.
“Housing is weighted at almost 30 per cent in terms of the rise in consumer prices, meaning it makes up a third of our consumption. A couple of decades it made up about a fifth, meaning housing costs have risen relative to other commodities in the past couple of decades,” she remarked.
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
