THE TAX BURDEN of Finnish wage earners will decline across income brackets under the budget proposal presented by the government on Tuesday.
The government announced it has decided to lower income taxation to the tune of 100 million euros with a particular emphasis on low and middle-income earners. The tax burden of high-income earners, in turn, will decrease due to the decision to continue levying the solidarity tax at a reduced rate.
Calculations by the Taxpayers’ Association of Finland reveal that although the decisions will lower the tax burden across income brackets, their primary beneficiaries are high-income earners.
The average wage earner, with a monthly income of 3,840 euros, will see their tax rate decrease by 0.6 percentage points, boosting their annual net income by 280 million euros. An earner with a monthly income of 2,000 euros will see their rate decrease by 0.9 points and an earner with a monthly income of 8,000 euros by 0.6 points, equalling a drop of 213 and 603 euros in annual tax contributions, respectively.
An earner with a monthly income of 14,000 euros, though, will see their rate decrease by as much as 1.2 points and annual net income by 2,116 euros due to the solidarity tax extension, the association reported on Tuesday.
Antti Lindtman, the chairperson of the Social Democrats, criticised what he said could be the largest one-off tax cut for high-income earners on YLE A-studio on Wednesday.
“The fact is that the highest-income earners, people making 14,000 euros a month, aren’t getting a small tax break. They’ll be getting more than 2,000 euros more every year. A teacher will be getting only a seventh, maybe eighth of this,” he stated.
“Looking at the big picture, it’s possible that high-income earners are getting one of the largest one-off tax cuts in Finnish history – in a situation where Finland is set to add almost 50 billion euros in debt over the electoral term.”
The government stated in a press release that the tax policy decisions are designed to improve the purchasing power of households, increase the incentives to work and strengthen the prerequisites for economic growth.
Minister of Finance Riikka Purra (PS) defended the measures on the topical affairs show on Wednesday.
“When you’re talking about percentages, of course taxation is decreasing the most for high-income earners. Through the credit for work income, the breaks are targeted especially at low and middle-income earners,” she retorted.
The government agreed to increase the tax credit by 100 million euros a year.
Purra and Lindtman also exchanged views on the government plan to slash social security spending by 1.2 billion euros.
“I personally have no need to conceal the fact that these savings are made for the benefit of the public economy. That’s exactly what they are, that isn’t changing,” Purra commented to YLE.
Lindtman, in turn, pointed out that social security benefits for people who are already in a vulnerable position are already low in the inflationary environment. “It’s a value-based choice for us, that you try to balance the economy but do so more justly.”
Aleksi Teivainen – HT