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Experts: Finnish firms could suffer from planned US corporate tax cuts

Finnish tax experts say that a proposal by US President Donald Trump to slash corporate taxes could make Finnish companies that export to the States less competitive. They also expressed concern that Trump's move could trigger a possible race across Europe to cut corporate taxes - a contest Finland can't afford to join.

Sormi osoittaa kannettavan tietokoneen ruutua.
Aalto Universitytax law associate professor Tommi Viitala says Finland has no tools to respond to escalating corporate tax in the US or Europe. Image: Ralf Hirschberger / EPA

US President Donald Trump’s plan to dramatically reduce corporate taxes will also affect foreign companies exporting to the country, say Finnish tax experts.

The businessman-turned-president has proposed reducing the corporate tax rate from the present 35 percent to 15 percent. When state taxes are added on top of that, companies in the US would end up paying some 20 percent tax on their profits, said Aalto University associate professor of tax law, Tommi Viitala.

Tax specialist Virpi Pasanen of the Confederation of Finnish Industries EK did not consider the tax cuts themselves a major policy measure. She said that this was consistent with a global move to lower taxes. However she expressed concern over the Trump administration’s stated intention of using the tax cuts to curb US imports.

"Foreign companies that operate in the US market but whose products are manufactured abroad would see their costs rise significantly, and this would affect their competitiveness compared to products made in the USA," Pasanen said in an Yle radio interview. 

During his inauguration address, President Trump rolled out an "America First" pledge, which vowed to rebuild the country using American hands. He floated tag lines such as "Buy American" and "Hire American", rhetoric broadly seen as protectionist.

Finland faced with little room to manoeuvre

According to Aalto’s Viitala, Finland has no policy measures of its own to counter Trump’s proposal if it goes through.

"In practice it would mean that if Finnish companies want to sell something in the US, then they should produce it there. This is a difficult equation from the Finnish perspective," Viitala added.

Both Pasanen and Viitala agree that if tax competition were to increase in Europe, Finland would possibility have to react – possibly with further reductions to the corporate tax rate.

Viitala also noted that Finland’s public finances are not currently in the best shape for such a move. He said that he does not believe that politicians will make any major changes to the corporate tax rate in the near future.

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