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(Aug 02, 2010) According to a press release issued by Finland's Ministry of Finance on July 28, 2010, the 2011 budget proposal is for €50.4 billion (about US$65.8 billion), with the budget deficit at 8.7 billion (about US$11.4 billion). Expenditure in 2011 will be about 4% lower than that for 2010, due to in part to a shift away from stimulus measures and loans to Finnish states as the country's economy returns to a growth track. The focus in 2011 will instead be on increasing tax revenue, which "will account for 85% of all on-budget revenue and is projected to grow by nearly 8% due to economic growth and tax changes that come into force in 2011." (Press Release, 91/2010, Ministry of Finance, Main Lines of the Ministry of Finance's Budget Proposal (July 28, 2010), http://www.vm.fi/vm/en/03_press_releases_and_speeches/01_press_releases/
20100728MainLi/name.jsp
.)

The key changes in taxation are:

  • a shift to energy taxation based on energy content and carbon dioxide emissions, with an increase in the energy taxes on all fuels (except transport fuels) to about €750 million (about US$980 million) from the beginning of 2011, in order to encourage environment-friendly practices and to compensate for tax revenue losses due to abolition of the employer's national pension contribution;
  • projected for 2012, an increase in excise duty on diesel fuel and decreased vehicle motive force tax on cars;
  • an increase in excise duty on sweets, ice cream, and similar products;
  • an increase in excise duty on soft drinks;
  • an easing of the criteria for employment tax to compensate for the tax-tightening impact of rising earnings levels and increased social insurance contributions;
  • a decrease in the tax on pension income to a tax rate no higher than that on corresponding earned income; and
  • a broadening of the tax base for the waste tax and an increase in that tax. (Id.)

The press release further noted that "[d]espite the economic recovery, the financial position of public finances will weaken further [in 2010]. In 2011 as economic growth accelerates, taxation tightens and social security contributions rise, the financial position of public finances will strengthen, but remain even so in deficit." Although reduction of the central government deficit is expected in 2011 with improvement in the economy and growth of revenue from increased value-added taxes and energy taxes, the government will still have to borrow nearly €9 billion in 2011. Therefore "the improved economic prospects will not … be sufficient to stabilise the central government's financial position." (Id.)

Author: Wendy Zeldin More by this author
Topic: Taxation More on this topic
Jurisdiction: Finland More about this jurisdiction

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Last updated: 08/02/2010