Helsinki only large city in Finland to lose wage earners
Low tax income has negative effect on next year’s budget
Jussi Pajunen
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Helsinki is the only large city in Finland in which the number of wage earners decreased in 2003 and 2004. At the same time, the growth in earned income was lower in Helsinki than the average for the whole country.
The information is contained in a memorandum drafted by Heikki Helin, a special researcher at City of Helsinki Urban Facts, in which he examines the development of tax revenue for Helsinki.
Helsinki’s tax revenue is expected to fall far short of expectations this year. The City Board decided a few weeks ago that the reasons for the decrease in the revenues should be examined.
The situation is expected to cause considerable budget pressure in Helsinki next year.
Helsinki Mayor Jussi Pajunen (Nat. Coalition Party) will put forward his budget proposal on Friday this week.
Tax revenues in Helsinki have declined by nearly EUR 400 million since 2000, even though the municipal income tax rate was raised by one percentage point in 2003.
From 2002 tax revenue in Helsinki has declined by EUR 94 million. Without the tax hike, the decline would have been EUR 185 million.
Heikki Helin says he does not have a clear-cut single reason for the decline in tax revenue. However, he does point out that the number of people paying taxes from their earned income has gone down.
At the same time, the number of wage earners has increased in Espoo and Vantaa.
The memo reveals that the number of people with jobs declined in the city in 2002 and 2003. At the same time the proportion of unemployed and students increased.
There was also a decrease in the number of jobs available in Helsinki. This was especially the case in information technology, from where people moved either into the ranks of the unemployed, or into lower-paying jobs.
Helsinki also suffers from a decrease in revenue from corporate taxation.
"Corporate taxes have declined all over the country. However, companies in Helsinki have been doing worse than those in other parts of the country", Helin says.
Migration patterns have not yet boosted Helsinki’s tax base, says Helin. Most of those moving into Helsinki are mainly students, or immigrants who come to the Helsinki region from other parts of Finland.
Helin also sees the housing available in Helsinki to be structurally disadvantageous; Helsinki has many one-person households, and the city gets less tax revenue from real estate transactions than the neighbouring communities.
"Although there is constantly more construction going on in Helsinki, it is not bringing taxpayers to the city with full efficiency. It simply means that people are getting more living space", argues Helin.
"We need to go deeper in the study", says Helsinki’s head of finances Tapio Korhonen.
"Do the reasons for the reduction in tax income lie in the migration trend, or in business, in which the focus on the service sector is a clear characteristic here in Helsinki? Is this linked with low incomes, or do we have more short-term jobs?"
Korhonen points to the general perception that people who move to Helsinki often have relatively low incomes.
"When families prosper and grow, they need more space, and move to neighbouring cities."
Korhonen sees housing programmes and business policy decisions as key priorities.
"It would be most important that people and their wallets should stay on this side. I don’t want tax competition that goes too far, but we need good taxpayers here."
Helsingin Sanomat
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| 28.9.2005 - TODAY |
 Helsinki only large city in Finland to lose wage earners
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