Taxation of low income-earners in Finland below European average
Belgium and Denmark have highest income tax rates
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Finns working at low-paying jobs earn more money after taxes than the European average.
According to an international comparison conducted by the Taxpayers’ Association of Finland, taxation of those earning low incomes in Finland is falling below the European average for the first time in over ten years.
The association compared taxation of earned income from 1995 onwards. The taxation of earned income and social security contributions by employers have been studied in 18 countries, most of which are located in Europe.
"The statistics show that the government has sought to reduce the taxation of those with low incomes. Low-income wages have become competitive on the European scale", explains economist Jaana Kurjenoja.
However, there are countries in Europe which tax low incomes even less than Finland - for instance, Spain, Norway, Estonia, and the UK.
In higher income groups, Finland has retained its position with few changes. Taxation is increasing more quickly in relation to other European countries in the comparison. For instance, a Finnish middle-income-earner has an income tax rate that is 3.3 percentage points higher than the average for Europe.
Taxation in all income brackets is highest in Denmark and Belgium.
Kurjenoja notes that in making comparisons it is important to keep in mind the different starting points for taxation in different countries. For instance, in Denmark, the focus of taxation is almost exclusively on the employee.
"Employers’ social security contributions are almost non-existent in Denmark, which enables employees to use taxation as a reason to negotiate relatively higher wages."
Taxation practices and wage levels differ considerably within the countries under comparison. For instance, Estonia has a flat-rate tax system, which has a relatively greater impact on those with low incomes. On the other hand, the wage level is lower than in Finland, and families are entitled to different kinds of tax breaks.
The taxation of families differs significantly in the different countries under comparison. Many countries have tax cuts for families and children, which reduce the parents’ income tax rate. In Finland, wage earners pay a uniform tax, which means that Finland imposes a relatively higher tax on those with families.
Differences emerge especially if a family depends on the earnings of one member with a higher-than-average income. In such situations, Finnish families pay higher taxes.
Helsingin Sanomat
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| 17.8.2006 - TODAY |
 Taxation of low income-earners in Finland below European average |
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