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Raising consumption taxes equally for everyone would have a negative impact especially on low-income earners, reminds Ilkka Kaukoranta, the chief economist at SAK.
Raising consumption taxes equally for everyone would have a negative impact especially on low-income earners, reminds Ilkka Kaukoranta, the chief economist at SAK.

 

The Central Organisation of Finnish Trade Unions (SAK) has expressed its doubts that next year’s budget has any room for income tax concessions.

“Wage earners do not love taxes, but people do understand that sufficient tax revenues are necessary to fund the welfare state. Introducing tax cuts would be silly in this situation in terms of short-term economic policy,” says Ilkka Kaukoranta, the chief economist at SAK.

The Blue Reform has proposed that income tax cuts worth 200–300 million euros be introduced in a bid to promote the purchasing power of Finnish consumers.

SAK on Wednesday joined the growing number of experts, policy makers and organisations that have recently drawn attention to the importance of re-building fiscal buffers in order to prepare for the growing pace of population ageing and the next economic downswing.

It also expressed its support for a proposal to shift the focus of taxation away from labour taxes as long as the shift carried out in a way that does not exacerbate income differences and undermine the sustainability of public finances.

“It is unlikely the government’s intention is to widen income differences and increase inequalities,” writes Kaukoranta. “Raising consumption tax rates equally for everyone would compromise the livelihood of especially low-income earners. Instead of consumption taxes, the government should look to capital taxes, such as the inheritance and dividends tax, for tax revenues.”

Kaukoranta encourages the government to also explore slow-acting measures as it attempts to improve the employment situation in Finland.

“A smart government would not leave slow-acting tools out of its toolbox. Lengthening compulsory education, adopting a skills guarantee to promote the skills of lowly educated adults and introducing innovation subsidies targeted at product and service development are tools with a gradual impact on the economy, but it is these and other similar tools that will create the foundation for sustainable growth,” he argues.

Aleksi Teivainen – HT
Photo: Mikko Stig – Lehtikuva
Source: Uusi Suomi

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