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Gov't resumes budget talks, tax cuts and job creation on the table

The coalition government decided last spring in budget talks to cut housing benefits and lower low and middle-income families' day care fees. Decisions on changes to taxation and corporate subsidy reductions were postponed until after the summer break.

Petteri Orpo
Minister of Finance Petteri Orpo Image: Jarno Kuusinen / AOP

This August, Finland's three-party centre-right government will pick up where it left off last spring in budget talks that are expected to result in proposals to change Finland's tax rates.

Unions demanded tax relief for earnings-related income after the austerity-minded government's hard-won 'competitiveness pact' to reduce unit labour costs became a reality, imposing a wage freeze, 24 hours of more work annually and reduced salaries for public sector employees.

Finland's labour organizations argue that the pact has also resulted in higher pension and social insurance contributions for employees, and therefore the loss to their purchasing power should be compensated for with lower income tax rates.

The Ministry of Finance will begin internal negotiations on the budget this week Tuesday, and the cabinet will meet for official talks later in the month.

Mixed messages about more spending

Representatives of the government's three political parties have recently hinted at potential added expenditure. Last weekend, the Centre Party's parliamentary group chair Antti Kaikkonen presented a proposal to increase the basic state pension payments in Finland by up to 50 euros.

Elsewhere, members of the conservative National Coalition Party have called for extending the household expense tax credit to low-income retirees and mandatory electric car charging points in every petrol station.

The breakaway New Alternative group, still a part of the Finns Party at the beginning of the summer, has for its part made public its desire to see cuts to vehicle taxation policies.

More than 5 billion in debt

Erkki Virtanen, former head of the Ministry of Employment and the Economy, wrote off these recent calls for more spending to election campaigning. He says serious structural cuts are in order if Finland wants to straighten its finances out.

No one will be surprised if Finance Minister Petteri Orpo, chair of the NCP, urges constraint once he's back to work this week. The Finnish economy is forecast to grow by two percent this year, but public finances are still in deficit to the tune of over five billion euros.

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