Finnish cabinet plans higher ‘sin taxes’ and lower corporate rates

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jyrkikatainenstytalokehysriihiDetails are emerging from government budget negotiations held at Helsinki’s House of Estates on Thursday.

The government plans to raise consumption taxes on some items while lowering corporate tax rates.

Tax hikes are in the offing for alcohol, sweets, tobacco and electricity. The latter may be a concession to the Green League, who have sought higher energy taxes as a way of encouraging more efficiency and reducing the need for further generation capacity.

There will be no increase in income or value-added taxes, including those on food and medicines.

A more appealing destination for companies?

Meanwhile the cabinet plans to reduce the corporation tax in an effort to keep companies headquartered here — and hopefully attract more direct foreign investment.

The move comes in reaction to tax reductions by nearby countries including Sweden, Estonia, Denmark and Britain.

Besides Denmark, they all now have lower tax levels than Finland – potentially making them more attractive as home bases for companies.

After an earlier reduction by the six-party government, Finland’s corporate tax rate is now 24.5 percent, slightly above the EU average of 22.4 percent.

The rate will be slashed to 20 percent, as compared to Sweden’s 22 percent.

This could represent a billion-euro drop in state revenues.

Government ministers held a press conference on Thursday afternoon at the House of Estates to announce details of tax and spending changes planned for 2014. They confirmed the details leaked earlier, adding that the upper limit on tax deductions for hiring home help will be raised to 2400 euros.

In all, the cabinet plans a further 600 million euros in budget cuts, spaced over the next three years.

The Federation of Finnish Enterprises welcomed the overall tax package on Thursday afternoon.

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