Municipal taxes set to rise in one in four communities
Income tax rates rising in 119 municipalities
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In the municipality of Rantsila, in North Ostrobothnia, the 2,000 residents will see their municipal income tax rise by 1.25 percentage points to 21 per cent.
The pressure is mainly caused by the exceptionally high pay rises for municipal workers. Costs of social and health services in the municipality are shooting up by eight per cent.
"All of the revenue from the tax hikes and the increase in state subsidies will go there directly", says Rantsila's Municipal Mayor Aimo Lehmikangas.
Many other local authorities are in the same situation. One in four municipalities plan to raise taxes next year. Taxes are rising in 119 municipalities, with a combined population of about a million people.
"The pay rises are not the only reason, naturally, but they are the biggest. Payroll costs are over half of the expenses of the municipalities", says Risto Parjanne, director of the Association of Finnish Local and Regional Authorities (KL).
Nurses are not primarily to blame for the higher taxes, as the contract approved on Monday will bring the nurses a little bit more than other municipal employees are getting.
Next year tax rates will be raised mainly by municipalities whose finances are already under pressure, and taxes are already high. The biggest problems are faced by municipalities with between 2,000 and 6,000 residents. As many as 36 per cent of them are raising their income tax rates.
Only three cities with more than 40,000 residents - Mikkeli, Kotka, and Rovaniemi - will raise their taxes.
"The positive development of tax revenue cannot be seen in all parts of Finland. It has concentrated on areas with a versatile business life", Parjanne explains.
He adds that large municipalities are in a better position because they have other sources of income in addition to taxes: energy utilities, for instance.
The tax increases next year will not be enough for the poorest municipalities, Parjanne fears. Tax revenue will decrease, as the business cycle peaks.
"It is clear that tax income cannot constantly just grow. Now six municipalities are already collecting the highest tax rate, 21 per cent. Some municipalities will probably go over that.
The pay hikes reached in the autumn will not affect the large cities of the greater Helsinki region. However, municipal leaders are nervous about what will happen when the municipal contracts expire in 2010.
Espoo Mayor Marketta Kokkonen says that the nurses' contract will fit into the city's budget. However, she adds: "Now it looks like it will be reflected in the whole professional field, and in the entire municipal sector. If this happens, it will be seen in the tax rate as well."
Helsinki Mayor Jussi Pajunen says that payroll costs in Helsinki will increase by 5-6 per cent. "We are trying to ascertain what will happen then. We are planning measures for greater efficiency, and it looks like they will be needed", Pajunen says.
However, in municipal finances, it is very difficult to predict events just three hears in the future.
"I wouldn't make any predictions so far into the future. Even the exchange rate of the dollar will have a greater impact over such aperiod of time than wages do", says Anders Kaustinen, head of finances in Vantaa.
Helsingin Sanomat
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| 21.11.2007 - TODAY |
 Municipal taxes set to rise in one in four communities |
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