Corporations that pay large dividends also receive public funding

Technology Agency cannot demand money back

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The Finnish state uses taxpayers' money to subsidise listed corporations that have decided to distribute hundreds of millions of euros in additional dividends to their shareholders.
      According to a Helsingin Sanomat investigation, half of the 29 corporations that have announced extra dividends from their 2003 earnings have received funding from the National Technology Agency of Finland (TEKES) in 2002 and 2003.
      TEKES funding is meant to be used for research and development projects.
      Many corporations have now opted to distribute large dividends before next year, when new rules on the taxation of dividend income take effect. Up until now, dividend income from Finnish listed companies has been tax-free for Finnish citizens.
     
Timo Kekkonen, the Chairman of the TEKES Board, says that the agency has discussed the problems related to additional dividend payout. "The situation may of course seem strange, but the subsidy decisions are not linked to the size of dividends", Kekkonen remarks.
      TEKES cannot demand its money back even if shareholders decide to pay themselves large dividends. On the other hand, if a company transfers production abroad, TEKES can withdraw its funding.
      Kekkonen believes that many of the projects funded by TEKES would never have been started had the company not received a public subsidy. "That is why public funding is significant, even if the company also has money itself", Kekkonen explains.
      Over 2,000 projects funded by TEKES are started annually.
     
Veli-Pekka Saarnivaara, the Director General of TEKES, feels it could even be harmful if TEKES did not fund the first-stage, risky projects of corporations that pay large dividends.
      "The time span of research and development would shorten, the projects would be less demanding, and corporations would invest less of their own money in research. These would all have adverse effects on Finnish economic growth", Saarnivaara says.


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Helsingin Sanomat