The Finnish Government has agreed on the budget framework for
the next four years. In order to balance the state economy, the
Government has decided on economic measures of EUR 2,7 billion. 1,5
billion of the total amount will be raised by straining taxation
and 1,2 billion by cutting expenses. The Government has also agreed
on a supplementary budget which includes tax incentives to support
economic growth.
Balancing tax measures
The majority of the balancing effects are carried out by an
increase in VAT rate and by freezing the inflation adjustments of
personal income taxation. The Government's decision to increase
value added tax by 1 percentage unit is supposed to raise
approximately EUR 750 million. Accordingly, the Finnish VAT rate
will become 24 %, which is still below the Scandinavian average.
For example Sweden and Denmark are already applying the EU maximum
rate of 25 %.
As mentioned, the Government has also decided to freeze the
inflation adjustments of the income tax to collect additional EUR
800 million. Tax burden has thus been calculated to be equivalent
with the level of 2008-2009 income taxation. For those earning more
than EUR 100,000 a year, a new "solidarity tax" will be
introduced, i.e. the applicable marginal tax rate for those earning
more than EUR 100,000 will become 1.5 percentage units higher. This
will again widen the gap between the taxation of capital income and
earned income.
Transfer tax rate for transfer of securities will rise from 1.6
% to 2.0 %, and the estimated additional income for the state due
to this measure is supposed to be approximately EUR 80 million. As
stock exchange is mainly transfer tax exempt, this amendment will
affect trading of non-listed companies and apartment markets.
The Government's framework decision also includes an
amendment to gift and inheritance taxation. Just three months after
the latest amendment, the Government introduces yet another tax
bracket for the gift and inheritance taxation. A new tax rate for
gifts and inheritances exceeding EUR 200,000 is now followed by a
new tax rate for those gifts and inheritances exceeding EUR 1
million. This will affect especially non-listed companies and
entrepreneurs by making changes of generation harder.
Growth supporting tax measures
In its supplementary budget, the Government utilises tax
incentives in order to support growth and employment. A new tax
incentive for R&D actions, which grants tax compensation
depending on the labour costs connected to the R&D operations,
is one of these incentives. Another tax related measure is to
accelerate investments by allowing double depreciations for a fixed
term ending in 2014.
A so called venture capital incentive is introduced for
individuals. An individual making a minority investment into a
non-listed small-sized company will be granted a tax deduction in
the year of investment. Another option is that the investor's
presumed acquisition cost will be increased to 50 % when
transferring the shares. At the moment the presumed acquisition
cost is 20 % for property owned for less than ten years and 40 %
after that. Both R&D incentive and venture capital incentive is
proposed to be applicable for a fixed term and both regulations
will include certain minimum and maximum amounts of
exploitation.
Other forthcoming tax measures include an increase in energy tax
and restrictions in mileage allowance. Also a few measures already
entered into the Government's program will soon become
applicable. A so called bank tax will become effective in 2013 and
a windfall-tax in 2014.
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