Prime Minister Juha Sipilä (Centre) underlined in a news conference that the equity savings accounts have been designed particularly to encourage and benefit small investors. (Credit: Jussi Nukari – Lehtikuva)Prime Minister Juha Sipilä (Centre) underlined in a news conference that the equity savings accounts have been designed particularly to encourage and benefit small investors. (Credit: Jussi Nukari – Lehtikuva)


The Finnish government’s proposal to introduce equity savings accounts for small investors has received a lukewarm reception from the Social Democratic Party and the Central Organisation of Finnish Trade Unions (SAK).

The government views in its newly unveiled budget proposal that the savings accounts would make investment an attractive proposition for a higher number of Finns.

Small investors would be able to transfer up to 50,000 euros to the equity savings accounts for investing in the shares of listed companies. The returns on investment, including dividends and share value gains, would be subject to a capital income tax upon the withdrawal of funds, the rate of which would be determined based on the proportion of the returns to the funds in the account.

The equity savings accounts are to become available in January 2020.

Prime Minister Juha Sipilä (Centre) underscored in a press conference that the accounts have been designed particularly for small investors, explaining that the upper limit on savings will allow investors to transfer 400 euros a month to the account over a ten-year period.

Timo Harakka, the budget and finance spokesperson for the Social Democratic Parliamentary Group, states that the initiatives set forth in the budget proposal would effectively see the government channel funds to its interest groups. The equity savings accounts, for example, would effectively lower taxes for the wealthy, while denting the tax revenues of Finland.

“Only four per cent of Finns own shares in more than four listed companies. The wealthiest one per cent owns nearly a half of the shares. What is preventing ordinary Finns from investing are not taxes but rather the fact that they are unable to save money,” he argues.

Harakka states that in spite of the 50,000-euro cap on funds, the accounts would primarily benefit banks and people who already have substantial investments.

He also estimates that small investors would benefit more from an income tax reduction for low and middle-income earners and concludes that the proposal for equity savings accounts is unlikely to get through the Parliament.

“The dividends derived from the equity savings account would not be taxed at the moment of accrual, contrary to the recommendation of an expert working group at the Ministry of Finance. The working group predicted that the loss of tax revenues would be tens of millions of euros, as [the proposal] would prevent us from taxing dividends paid overseas,” states Harakka.

The proposal is a step in the wrong direction also according to SAK.

“It would effectively lower capital taxes and reduce the state’s tax revenues. We should be strengthening the public economy instead of devising new tax breaks for investors,” an SAK spokesperson says according to Kauppalehti.

The commerce-oriented newspaper adds that the equity savings accounts have received support from the financial sector, in spite of the 50,000-euro cap on savings and implementation in 2020.

Sari Lounasmeri, the managing director of the Finnish Foundation for Share Promotion, views that the euro-denominated cap is better than the alternative proposed by the working group of subjecting the dividends to a tax immediately upon accrual.

“This kind of an account may become a good product that interests small investors and the asset management services of banks,” she says.

The Finnish government, she underlines, must also find legislative means to ensure the tax breaks do not end up in the pockets of banks in the form of high commission and brokering fees.

Aleksi Teivainen – HT
Source: Uusi Suomi