Budget proposal: alcohol tax to go up, taxation of pensioners and inheritance to ease

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The price of strong spirits, wine, and beer are to increase from the beginning of next year. The planned alcohol tax hike will be greatest on spirits. According to the budget proposal by the Ministry of Finance, some pensioners will have to pay less taxes, and the upper limit for untaxed inheritances will rise. Taxation of earned income will not change.
      Minister of Finance Jyrki Katainen (Nat. Coalition Party) did not propose an increase in the tax on tobacco, contrary to an appeal by fellow party member, Social Services minister Paula Risikko. According to Katainen, tobacco is a product that is easily subject to smuggling, and a price increase would easily lead to illegal imports of cheaper cigarettes from neighbouring countries.
     
The tax cuts for pensioners will apply to those with an annual income of EUR 13,000 to 31,000. There have been calls from the Centre Party to ease the taxation of pensioners with lower incomes as well. However, Katainen said that the aim now is to rectify an unfair situation in which pensioners are paying more tax than working people earning the same amount.
     
As for cuts in income taxes and value-added tax on food, Katainen said that at the end of the month the government could draw up a notional schedule for such changes. He added that the schedule will have to be flexible in case cyclical changes occur.
      He added that the wage increases that have been agreed upon will bring so much purchasing power that the stability of economic development will not allow further increases through income tax cuts.
      Katainen also said that in its budget negotiations, the government will discuss more comprehensive reform of inheritance taxation. Tax brackets might also be revisited in a way that would ease the high taxation of childless unmarried couples.
     
In the view of the Centre Party, the greatest shortcoming of the Finance Ministry's proposal was the lack of a schedule for cuts in VAT on food.
      However, Agriculture and Forestry Minister Sirkka-Liisa Anttila (Centre), who had been hoping for a cut in VAT on food already next year, said that she expects that the government will agree "in good harmony" on the schedule of the tax cut.
      Anttila also called for a somewhat higher increase in the alcohol tax. Alcohol taxation was rolled back in 2004, but all political parties are now in agreement that the measures were something of a failure, as consumption has soared, and with it social problems relating to alcohol abuse.


Previously in HS International Edition:
  Finance Minister plans changes to inheritance taxation (30.7.2007)
  Experts say planned cuts could lead to scrapping of inheritance tax (1.8.2007)

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