PETTERI Orpo (NCP), the Minister of Finance, has indicated he is well aware of the criticism levelled against a government proposal to introduce a new kind of equity savings account for small investors by the Social Democrats.
“If you’re accumulating wealth by saving, then you’ll have money for old age even without a social democrat looking over your shoulder,” Orpo stated to Kauppalehti on Sunday.
Antti Rinne, the chairperson of the Social Democratic Party, has proposed that instead of introducing the account, the government adjust the age limits for the existing restricted long-term savings accounts, the so-called PS accounts.
The PS accounts have been designed to provide pensioners with greater financial security by allowing them to agree with financial service providers on how their funds should be invested in shares or fund subscriptions, for example. The account holders are entitled to an annual tax break of up to 1,700 euros as long as they do not withdraw any funds until reaching retirement age.
“The PS account comes with a tax benefit and, consequently, with a lot of regulations and limitations. It has been designed for retirement saving, and we’re talking about a completely different product than the equity savings account. Not all investments are about saving for retirement,” said Orpo.
“An equity savings account could be opened for children, and they could use the savings when moving into a home of their own.”
The Finnish government has marketed the equity savings accounts as a means to make investment a more proposition for ordinary citizens. The account could be used to invest up to 50,000 euros in the shares of listed companies, while the funds would only be subject to a moderate capital income tax upon withdrawal.
“The account is a result of government negotiations,” said Orpo.
“If we did compromise on something, it was on the number and size of investment products. But when the structure is right, we can revisit the possibility of adding other investment products to the account and raising the euro-denominated limit later.”
What is key, he highlighted, is that no tax is levied on dividends paid to the account and that the rate of tax levied upon withdrawal is determined based on the proportion of the returns to the funds in the account.
Left-wing opposition parties have criticised the proposal for allowing investors to circumvent taxes by withdrawing the investments abroad.
Orpo pointed out that investors can already circumvent taxes by selling their shareholdings after moving overseas. The objective is to rectify the issue through international co-operation, according to him.
“When you’re trying to offer the possibility to retain dividends in accounts to small investors, the Social Democrats are looking for possible problems even though they should be on wage earners’ side,” he said. “I don’t understand that kind of thinking. They didn’t want to address the problems of insurance wrappers or capital redemption policies.”
Aleksi Teivainen – HT
Source: Uusi Suomi