Disagreement emerges in government over property tax hikes

Katainen still wants only to raise upper limit of property tax

Mari Kiviniemi

Jyrki Katainen

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The view expressed by Minister of Finance Jyrki Katainen (Nat. Coalition Party) that only the upper limit of property taxes should be raised, has sparked negative reactions in the Centre Party.
      Minister of Public Administration and Local Government Mari Kiviniemi (Centre) pointed out on Thursday that the government decided about three weeks ago that both the lower and upper limits should be raised.
     
Local authorities decide on the level of property taxes within a range set in legislation.
      Wealthy municipalities tend to stay close to the lowest level, while poor municipalities tend to try to charge as much as they are legally entitled to.
      This means that merely raising the upper limit would not oblige more prosperous local authorities to raise their property taxes at all. The minimum tax is in force in Espoo, Helsinki’s neighbour to the west, which is a bastion of support for the National Coalition Party.
     
Kiviniemi said on Thursday that she had not heard that any party or ministry would want to deviate from the policy lines drawn up recentlyh, and that therefore, the lower limit for property taxation should also be raised.
      Katainen, who was in Brussels on Thursday at a meeting of EU finance ministers, commented on the matter very briefly. He said that he continues to support a raise only to the maximum property tax level.
      “The economic situations of municipalities vary a great deal when going into the recession. That is why I could consider raising only the upper limit at this stage”, Katainen explained in writing.
     
Katainen feels that the government should not force local authorities to increase taxation by raising the property tax minimum.
      “By raising the upper limit, those local authorities who want to use this method would be given the freedom to use various options to ease their economic situation, without being forced to.”
      “I would urge municipalities to raise property taxes rather than income taxes, if tax hikes are inevitable.”
      Katainen says that a decision to raise the property tax minimum would be “better to make in a situation in which economic development is on a steady foundation again.”
     
Kiviniemi nevertheless fully supports Katainen’s idea to help local authorities raise more revenue through changing the division ratio of the property tax.
      She plans to bring a proposal to the government’s budget framework talks aimed at helping municipalities which are in an especially difficult economic situation.
      “We need to ease the increasing inequality of municipalities to some degree”, Kiviniemi says.
      As an example, Kiviniemi mentions Utsjoki in the far north of Finnish Lapland, which is running a deficit of about EUR 2 million, and is already charging the maximum property tax.


Previously in HS International Edition:
  Tax changes to bring local authorities hundreds of millions in revenue (19.3.2009)

Helsingin Sanomat