Whether you love it or hate it, the Juha Sipilä government’s activation model will be permanently laid to rest starting 1 January. However the ghost of the controversial scheme to get unemployed jobseekers into work will live on – at least for a short time.
That’s because unemployment benefits for the month of January will be paid on the basis of the model, which required jobseekers to either sign up for training, part-time work or start a company during a three-month assessment period. Failure to meet the conditions resulted in a 4.65-percent reduction of the benefit.
Elimination of the model will cost about 50 million euros. However the state will save roughly 12 million euros as people whose benefits had been cut under the scheme will no longer apply for income subsidies or housing benefits to make up for the shortfall in their income. This means the final price tag for the activation model burial will be some 39 million euros.
Income tax changes
Low- and middle-income earners will find they pay somewhat lower income taxes in 2020. The 200-million-euro tax relief programme will involve increasing the limit for basic deductions as well as income-related and pension deductions. Income taxes will also be subjected to an index adjustment that reflects possible income increases.
A "solidarity tax" on high-income earners introduced by the Sipilä government in 2015 will remain in effect until the end of the current administration’s term in office. However the withholding tax for foreign executives will fall from 35 percent to 32 percent.
The overall effect of all fiscal measures implemented will mean that taxes paid by pensioners and low income earners will remain about the same as in 2019. However the overall effect on middle income earners will be a 0.4-percentage-point tax hike, while high income earners will pay an overall 0.5 percentage points in taxes.
Employers will also face higher contributions for basic unemployment allowances, labour market support and sickness and parental allowances.
Bigger pensions for low-income retirees
National pension recipients will see a 34-euro increase in their monthly pensions, while the guarantee pension will rise by 50 euros per month. The measure will increase the full pension for a retiree living alone to roughly 663 euros, while pensioners co-habiting will receive 592 euros monthly. Starting 1 January, the full guarantee pension will be about 835 euros. An estimated 610,000 seniors will benefit from the pensions hike.
Hike in the retirement age
The lowest retirement age will increase by three months. Persons born in 1957 (62-year-olds) will continue to be able to retire at age 63 and nine months. The rise in the pensionable age was the result of pension reforms implemented in 2017.
The 2020 life expectancy coefficient -- which helps determine the size of pensions paid out -- will reduce pensions for people 61 years old and younger by 4.6 percent. It will not affect people who have already retired.
Subjective right to daycare restored
The new government has restored the subjective right to full-time daycare to all families with small children. The regulation will take effect from August. The right means that even stay-at-home parents can send their children to full-time daycare if they so choose. In 2016 the Sipilä government introduced a measure to provide only part-time daycare if one parent was at home full-time.
Higher payments at the pump
Starting in August, it will become that much more expensive to fuel a car, following a 250-million-euro petrol tax hike. This will likely result in a 6.3-cent increase in the price of petrol and a 6.9-cent rise in the price of diesel.
Aid boost for students
The New Year will usher in a 25-euro increase in the study grant for students caring for a child. The overall benefit will rise to 350 euros per month. In other cases the study grant will see a one-percent bump in August, when the benefit will be linked to the national pension index.
Starting this year, an annual index adjustment will take place at the beginning of the autumn term. At the same time, the income limit for qualifying for the benefit will increase by about 4.5 percent to mirror overall changes in wages. Additionally, the study material supplement paid to low income families will increase by about 50 cents to 47.30 euros monthly.
Cheaper passports and ID cards
The cost of passports and ID cards will fall from 1 January. Getting a new passport by visiting a police station will set you back 51 euros, while an online application will cost 45 euros. Meanwhile the price of an ID card will fall to 54 euros if you apply in person, while an electronic application will drop to 48 euros. The lower prices have been attributed to more efficient processes and growing volumes of applications.
Costlier sugary drinks
Taxes on sugary soft drinks will make it more expensive to support a sweet habit. The excise tax on beverages with more than 0.5 percent sugar will rise from 27 cents to 32 cents per litre, while the tax on other drinks will creep up from 12 to 13 cents per litre.
The tax on powdered beverage mixes will increase from 1.72 cents to 2.04 cents per kilogram, while the tax on other drink mixes will see a bump from 1.04 euros to 1.13 per kilogram. At the same time the tax on low-alcohol drinks will shoot up to 32 cents per litre or 11.40 cents per centilitre of ethyl alcohol.
The tax increases will push up the price of sugary soft drinks by an estimated average of three percent, while prices of other drinks will rise one percent on average.
The tax exemption threshold for small-scale production of soft drinks will rise from the current 50,000 litres to 70,000 litres, while a similar change will apply to the beverage packaging tax.
Household expenses credit falls
The household expenses tax credit - which covers things like home renovation or other household work - will come under pressure in 2020 as the maximum allowance falls from 2,400 euros to 2,250 euros. Also starting 1 January the mortgage interest rate deduction will fall to 15 percent from 25 percent, and the deduction will be rolled back entirely in 2023.
Pricier cigarettes
Smoking will become more expensive as tobacco products taxes will rise by an average of 14 percent between 2020 and 2021. The tax hike will affect the price of cigarettes, cigars and cigarillos as well as pipe and smoking tobacco and fine-cut tobacco for rolling cigarettes. The increases will be implemented in four stages with the first taking effect from 1 January, the second from the beginning of July, the third from the beginning of 2021 and the fourth from July 2021.
The cost of cigarettes and fine-cut tobacco will increase by 12 percent on average. The price of a pack of 20 cigarettes will rise by about 95 cents.
New investment option
Starting 1 January investing will become more accessible by way of equity savings accounts. Customers of banks offering the service can transfer a maximum of 50,000 euros to equity savings accounts for investing in publicly-listed companies. Customers will only pay taxes on the returns on their investments when they withdraw money from the accounts.
Cheaper public transportation in capital region
The prices of tickets for the longest routes served by Helsinki Regional Transport (HSL) will fall starting Wednesday. The price cuts will affect trips on zones three and four – tickets on zones ABC, BCD, CD, and ABCD, representing a reduction of 2.4 percent of all ticket prices. Starting 1 January, R-kioski outlets will begin to charge consumers for selling HSL tickets.
Population and local registries to merge
In 2020 the Population Register Centre and local registry offices will merge to form a new entity, the Digital and Population Data Services Agency or the Finnish Data Agency. The new organisation will focus on digitalisation and accessible information for customers.
Restrictions on foreigners' land purchases
Persons from outside the EU and the European Economic Area (EEA) will have to apply to the Defence Ministry for a permit to purchase property in Finland. The aim of the reform is to allow the government to intervene in real estate deals that may pose a threat to national security.
At the same time a new regulation will take effect giving the state the preemptive right to purchase properties deemed to be close to strategic locations.
Support for debtors
Debtors facing distraint orders on their salaries will in future be allowed to keep 22.63 euros per day plus an additional 8.12 euros per day for living expenses. In addition, the ground for sick pay will also change so that the allowance will be calculated on the basis of an individual’s annual income.
Prescription medicine deductibles change
Starting 1 January personal deductibles for the cost of prescription medicines will be visible at pharmacies. The annual deductible in 2020 will rise to 577.62 euros, up from 572 euros. An individual who pays more than the annual excess will only receive 2.50 euros for each subsequent prescription.
Changes to sentencing
The New Year will see changes to suspended prison sentences. For example it will become more difficult for repeat offenders to get suspended prison sentences. In addition defendants aged 21 and over who get suspended sentences will also be required to serve a monitoring sentence. Under current legislation only persons under the age of 21 are sentenced to monitoring sentences.
Brexit effects
The UK’s departure from the EU on 31 January ushers in restrictions on the movement of some people and will also affect flights and parcel post. The change means that Finnish Customs will have to check up to one million airline passengers, thousands of flights and more than 600,000 parcels originating in the UK.
Ordering goods from the UK will also become more costly. The change will especially affect products coming from China, which leads other countries in mail order business. This means an increase in processing fees of a few dozen cents for goods coming from China.
In additional consumers will have to pay a 2.90-euro customs clearance processing fee for goods valued at more than 22 euros. The fee to be applied on extra-EU goods will take effect from 31 January.