New government programme taxes high incomes more heavily than before

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The government’s policy programme will hit earners of high incomes fairly hard.
      The six-party coalition is raising the tax on capital gains income from the current 28 per cent to 30 per cent and for capital income that exceeds EUR 50,000 a year, the tax will rise to 32 per cent.
      This will still be lower than the 35 per cent that the Social Democratic Party had called for, but the conservative National Coalition Party was staunchly opposed to the idea.
     
Large inheritances of more than EUR 200,000 will incur a 16 per cent tax. At present the highest inheritance tax paid by the next of kin of a deceased person is 13 per cent.
     
The deductibility of interest on home loans will be reduced by degrees by a total of 25 per cent. Basic value-added tax will be kept unchanged, but several excise taxes will rise. The price of petrol will go up by about ten cents a litre, as the hike on motor fuels will be implemented with the aim of bringing the state an additional EUR 250 million a year in revenues.
      Pleasures and vices will also become more expensive. An additional EUR 250 million is to be collected through higher excise taxes on alcohol, tobacco, soft drinks, and sweets. In addition, more sweet foods will be taxed.
      However, plans to raise the tax on electricity were dropped. The Greens’ Anni Sinnemäki says that this happened long before the government programme was ready.
     
Revenue from income taxes is not rising – in fact, the opposite is true. “The taxation of labour will not be increased during the electoral term”, the programme promises. In addition, those with smaller incomes will be helped by a raise in the basic deduction in municipal taxation, and the increase in the deduction on work income.
      The basic deduction will apply to those with the lowest incomes – mainly those living on welfare benefits or very low pay. Taxation is set to decrease by about EUR 10 a month. The work income deduction should ease the situation of those with low and medium incomes by about EUR 150 a year.
     
“This is the biggest extended hand to the very poorest that has happened in my lifetime. I am very proud of these achievements”, said Left Alliance chairman Paavo Arhinämäki.
      Before the elections, Arhinmäki had said that it was unlikely that his party could work together with the National Coalition Party.
     
Both coming Prime Minister Jyrki Katainen (Nat. Coalition Party) and Jutta Urpilainen, the chairwoman of the second-largest government party, the Social Democrats, said that the programme eases the lives of those with the lowest incomes, narrows income differences, and increased fairness in taxation.
      “There is tremendous input into the earnings of those with low incomes. Differences in income will narrow, and the level of poverty will decrease”, Katainen enthused.
      “I am very pleased with the outcome. The government programme is courageous and it brings renewal to Finland.”
     
The other party leaders in the new coalition also emphasized the promotion of social justice inside the programme. Alongside growth and stability, the prevention of marginalization is one of the key goals, and this is reflected in the programme.
      “This shows a change in political direction”, Urpilainen said, praising the government’s ambitious goal of bringing unemployment down to five per cent.
     
Education will be hit by cost reductions. The sector administered by the Ministry of Education will see more than EUR 300 million cut from its budget.
      On the other hand, student support will be index-linked, which means that it will rise annually.
     
The publication of the government programme went late into Friday evening as the main group of negotiators drew up changes to the tasks of the various ministries and the distribution of ministerial portfolios.
      The parties in the new government will be the National Coalition Party, the Social Democratic Party, the Left Alliance, the Greens, the Swedish People’s Party, and the Christian Democrats.
     


Previously in HS International Edition:
  Government talks: six parties again seek common ground on taxes and cuts (13.6.2011)

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