Income tax lowered by seven percentage points in 12 years

Teemu Lehtinen

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Taxation is an interesting subject!
      This was the only conclusion one could draw when observing the thousands of people flocking into Helsinki's Marina Congress Centre to listen to various lectures on the subject of taxation on Wednesday, the opening day of the two-day "Tax 2007" event.
      The discussions in the main auditorium, which was filled to capacity, were also followed on TV monitors in the hallways as well as on screens in smaller lecture rooms.
      The only common denominator among the participants seemed to be greying hair. Very few younger people had found their way to the event.
     
In his lecture, Teemu Lehtinen, President of the Taxpayers Association of Finland, presented calculations that indicated that during the last 12 years the taxation of earned income had dropped by seven percentage points from 37.5 in 1995 to today's 30.2 per cent.
      According to Lehtinen, the former Prime Minister Paavo Lipponen's (SDP) first government managed to cut income taxation by EUR 1.9 billion and his second government by EUR 2 billion. The sitting government led by Matti Vanhanen (Centre) has so far managed to lower the income taxation by further EUR 2.2 billion.
      The cuts have benefited all income brackets, with a slight emphasis towards the low-income end.
      While "record growth" has been recorded in income tax revenue and the national economy is "alive and kicking", the main question for the next parliamentary term is how the lowering of taxes will continue.
     
Lehtinen's speech was followed by a taxation debate between the SDP taxation working group chairman Matti Ahde, the Centre Party vice-chairperson Mari Kiviniemi, and National Coalition Party's parliamentary group chairman Jyri Häkämies.
      Their remarkably concurrent view was that the earned income tax cuts should continue at a moderate pace even in the next legislative period.
      Häkämies estimated that the so-called allocation margin for the next legislative period would be in the region of EUR 4-5 billion, of which EUR 2 billion could be directed to tax cuts.
     
Both Ahde and Kiviniemi considered the present corporate and capital tax (investment tax) levels appropriate, although Ahde pointed out that the government should have the opportunity to lower the corporate tax if the international tax competition so requires. The Finnish capital and corporate tax percentages are 28 and 26 respectively.
      Kiviniemi, in turn, reminded the audience that compared to Finland's realistic market rivals the present corporate tax level is already competitive.
      Of the West European countries only Ireland and Austria have lower percentages, 12 and 25 respectively.


Links:
  Taxpayers Association of Finland

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