Fewer local authorities raising municipal income tax rates

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The rising trend in municipal income taxes is easing somewhat next year. Only 49 local authorities are raising their tax rates. In each of the past five years taxes have gone up in more than 100 municipalities. Last year, the number was 181.
      Timo Kietäväinen, deputy managing director of the Association of Finnish Local and Regional Authorities (KL), says that a state effort to boost municipal finances, in which more than EUR 700 million was provided to local authorities, reduced the need to raise taxes. Cutting costs and positive trends in employment have also improved municipal finances.
     
KL hopes that the government that takes over after next year’s elections will show restraint in spending. The association notes that the basic problem of municipal economics is the same: costs are rising faster than revenue.
      Next year 139 municipalities will have tax rates above 20 per cent. The title of the municipality with the highest municipal tax rate - 21.50 per cent - is shared by Vihanti in North Ostrobothnia and Tohmajärvi in North Karelia.
      Some of the larger cities in Finland are raising their tax rates. Helsinki and Kouvola are boosting their municipal income taxes by one percentage point, and Lahti’s tax is going up by half a point.
     
Two struggling local authorities - Heinola in Central Finland and Pelkosenniemi in Finnish Lapland - are taking an unusual approach to their financial woes.
      Pelkosenniemi rejected recommendations from the state that it should merge with neighbouring Kemijärvi, and it also decided to cut its municipal tax rate by a quarter of a percentage point to 20.50 per cent, even though it is officially listed as being in a financial crisis.
      Heinola also lowered its tax rate to 20.50 per cent - a half-point cut - after deciding not to take part in a municipal merger of the Lahti region.
     
The lowest rate anywhere in the country will be 16.25%, enjoyed by the residents of Saltvik in the Åland Islands, who have taken over the crown traditionally held by the wealthy metropolitan enclave of Kauniainen.
      The average figure nationwide will climb by 0.2%-points to 19.17%.


Previously in HS International Edition:
  Cities in Helsinki region subsidise other parts of Finland (17.11.2010)
  Helsinki borrowing more and raising municipal tax rate (4.10.2010)

Links:
  Association of Finnish Local and Regional Authorities

Helsingin Sanomat