Nokia troubles cause financial problems for several Finnish municipalities

print this

Oulu Mayor Matti Pennanen stands on the roof of Oulu City Hall, looking over his city, which faces new financial difficulties.
      The reason is Nokia, whose success had brought millions of euros of tax revenue each year to the city. Now things are different.
      In the past two years, Nokia has been cutting jobs, depriving Oulu of municipal income tax revenue of hundreds of Nokia employees.
     
Pennanen is adamant that Oulu will not dwindle as Nokia has. In the next four years, Oulu aims to create 5,000 new jobs to replace those that have been lost at Nokia and its subcontractors.
      Nokia’s ability to pay taxes has fallen sharply throughout the country. In 2007 Nokia paid EUR 1.3 billion in corporate taxes, nearly EUR 300 million of which went to the municipalities where Nokia facilities were located. In 2009 the corporate taxes paid by Nokia in Finland collapsed to EUR 66 million, with only about EUR 20 million going to the local authorities.
      Nokia’s job cuts in Salo, Espoo, Tampere and Oulu are the largest ever affecting the new technology in Finland. Nokia has announced the elimination of another 1,400 jobs in Finland.
     
A new rise in Oulu woulf require good planning and plenty of work, Mayor Pennanen says.
      One source of optimism in his view is that after a municipal merger, Oulu’s population will be the youngest in Europe, with an average age of less than 35 years.
     
During Nokia’s fat years Oulu did very well. Up to EUR 60 million of the city’s billion-euro budget came from corporate taxes, and about half of that was from Nokia.
      The biggest tax revenues for Nokia municipalities have come from the income taxes of thousands of employees of Nokia and its subcontractors.
      A number of municipal projects financed by the taxation of the boom years are still in construction.
     
In Salo, Mayor Antti Rantakokko says that the city is adapting to the lost tax revenue. The city’s debt is growing sharply, by several hundred euros per resident in the coming two years.
      The municipal income tax rate is growing by four percentage points, to reach 19 per cent next year.
      When Nokia was the largest single source of tax revenue for Salo, tax revenue from the company amounted to EUR 80 million. In 2009 this shrunk to about seven million.
     
In Espoo, Nokia’s share of corporate tax revenue is between five million and eight million euros. Corporate taxes bring in about EUR 120 million a year. The annual yield from income taxes is about EUR 1 billion.
      Nokia was once Espoo’s largest payer of corporate taxes, but Espoo’s finances would not suffer much now even if Nokia’s corporate tax payments were to dry up completely.
     
The assessment in many Nokia cities is that the decline in Nokia’s significance in municipal finances is not necessarily a bad thing.
      When new jobs are created to replace the ones that were lost they they get distributed among smaller companies, instead if a single large one. The possible closure of a small or medium-sized company would not cause a massive collapse.
      If the finances of a municipality come from many streams, fluctuations are not so big that they would cause a local authority’s economy to fail.


Previously in HS International Edition:
  More than 1,000 Nokia employees walk out in Tampere in protest at Symbian phase-out (11.2.2011)
  Nokia seeks to soften blow of job cuts (28.4.2011)
  Nokia’s subcontractors are wandering in the fog of an uncertain future (18.5.2011)

Helsingin Sanomat