|www.helsinginsanomat.fi/english||print | close window|
Cities in Helsinki region subsidise other parts of Finland
Finland’s state municipal subsidy system shares the wealth of municipal tax revenue, and the biggest payers are found in the Helsinki region.
About three percentage points of municipal tax rate paid by residents of Helsinki and Espoo are paid to other parts of the country. In Helsinki the figure next year will be EUR 303 million, which is twice the amount that the city spends on sports, recreation, culture, and libraries.
Helsinki Finance Director Tapio Korhonen is calling for an overhaul of the system during the next government term. He says that the burden on Helsinki will become intolerable in the coming years.
“The city will have to build new power plants and pay more fuel taxes. The EUR 300 in revenues from the energy utility will gradually fall to EUR 100 million.”
Korhonen says that the system fails to take into account many of the burdens placed on the Finnish capital.
“Helsinki receives the greatest number of immigrants and bears responsibility for phenomena typical of a large city, which certainly increases costs.”
Espoo Director of Finance Reijo Tuori also points to the immigration issue.
“More people are coming from abroad, and they need special services, which cost money.”
Espoo’s contribution to the subsidy system is EUR 182 million, about the same that is spent on day care centres and preschool. Special health care costs slightly more - EUR 202 million.
Touri says that the system is inflexible, as it does not take into account the sharp fall in corporate tax revenue caused by the recession.
Normally Espoo gets about ten per cent of its revenue - more than EUR 100 million - from corporate taxes.
The system also does not encourage municipalities to establish lucrative conditions for businesses.
“If a city is successful and companies are established and succeed, part of the taxes that they pay go immediately to other local authorities”, Tuori says. “Of course some of it stays with the city”, he adds.
The levelling of municipal tax revenue also does not encourage municipal mergers, which the state is trying to promote through its Paras project.
“If a poor municipality merges with a richer one, it is likely that the new unit will lose levelling money. This does not encourage small municipalities to merge”, says director Matti Kallio of the Association of Finnish Local and Regional Authorities.