€1.5 billion of the total amount will be raised by straining taxation and €1.2 billion by cutting expenses. The government has also agreed on a supplementary budget which includes tax incentives to support economic growth.
Balancing tax measures
The majority of the balancing effects are carried out by an increase in VAT rate and by freezing the inflation adjustments of personal income taxation. The government's decision to increase value added tax by one percentage point is supposed to raise approximately €750 million. Accordingly, the Finnish VAT rate will become 24%.
The government also decided to freeze the inflation adjustments of the income tax to collect additional €800 million. Tax burden has thus been calculated to be equivalent with the level of 2008-2009 income taxation. For those earning more than €100,000 a year, a new "solidarity tax" will be introduced, i.e. the applicable marginal tax rate for those earning more than €100,000 will become 1.5 percentage points higher.
Transfer tax rate for transfer of securities will rise from 1.6% to 2%, and the estimated additional income for the state because of this measure is supposed to be approximately €80 million. As stock exchange is mainly transfer tax exempt, this amendment will affect trading of non-listed companies and apartment markets.
The government's framework decision also includes an amendment to inheritance taxation. A new tax rate is introduced for inheritances exceeding €1 million.
Growth supporting tax measures
In its supplementary budget, the government proposes tax incentives to support growth and employment. A new tax incentive for R&D, which grants tax compensation depending on the labour costs connected to the R&D operations, is one of these incentives. Another tax related measure is to accelerate investments by allowing double depreciations for the Finnish industry for a fixed term ending in 2014.
A so called venture capital incentive is introduced for individuals. An individual making a minority investment into a non-listed small-sized company will be granted a tax deduction in the year of investment. Another option is that the investor's presumed acquisition cost will be increased to 50% when transferring the shares. At the moment the presumed acquisition cost is 20% for property owned for less than ten years and 40% after that. Both R&D incentive and venture capital incentive is proposed to be applicable for a fixed term and both regulations will include certain minimum and maximum amounts of exploitation.
Other forthcoming tax measures include an increase in energy tax and restrictions in mileage allowance. Also so called bank tax will become effective in 2013 and a windfall-tax in 2014.
Janne Juusela (janne.juusela@borenius.com)
Borenius – Taxand
Tel: +358 9 615 333
Website: www.borenius.com
