Top income-earners benefited from lower taxes in 2004
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Taxation of Finns with the highest incomes continued to decline last year, as investors cashed in on more dividends and other capital gains income than in six years. According to a survey by Helsingin Sanomat, the 1,000 highest income earners paid nearly nine percentage points less in taxes in 2004 than they did in 1999.
In the same period, the taxation of middle-income earners has eased only by 3.3 percentage points.
However, taxes for high income-earners eased less last year than in previous years. The overall tax burden of the 1,000 highest earners, which has declined by several percentage points in previous years, went down by just 0.6 percentage points in 2004, whereas ordinary wage earners saw their taxes decline by 0.7 points.
On the basis of last year's figures, the taxes paid by the income elite are no longer declining proportionally faster than those of ordinary wage earners. However, only the coming years will tell if the trend is a permanent one.
Helsingin Sanomat has monitored the earnings of the top income-earners, and the composition of those earnings, since 1999, when comprehensive information first became available from the tax authorities.
Each year, three groups have been picked from the statistics. The focus has been on the 1,000 individuals whose earned income combined with income from capital gains has been the highest.
The second group involves those 1,000 with the highest earned income.
The third group comprises the top 1,000 earners of capital gains income.
The top earners last year were corporate owners who sold their own companies, as well as those living on dividends. These groups have managed to keep their earnings above others for six years, while at the same time, those with the highest earned income have remained fairly stagnant.
Finns took out a record amount of capital gains income last year, because taxation of dividends was still lower last year than it is now. Many listed companies even paid out extra dividends.
The 1,000 top capital gains income earners amassed a total of EUR 1,900 million - an average of nearly EUR two million apiece.
The greater tax cut enjoyed by the income elite in 1999-2004 is attributable, among other things, to the fact that the proportion of capital income in the top income bracket has increased. Income from capital gains is taxed at a lower rate than wages or salaries, which is why an entrepreneur is better off taking his or her income in the form of dividends.
According to the Helsingin Sanomat study, the top earners of capital income pay just over 30% of their income in taxes, while the figure is more than 50% for those with earned income.
Small wonder then, that high income-earners seek to change their earned income into capital income, if possible. For an ordinary wage earner, this kind of tax planning is not possible.
More on this subject:
 Fortum execs maintain strong foothold at top of income list
Foreign Minister Tuomioja most prosperous of Finnish political elite
Fewer artists among highest earners
Helsingin Sanomat
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