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Ministry proposes corporate tax to clean environmental damage

The Ministry of Environment has proposed that Finland launch a new fund for addressing man-made environmental disasters. Gathered as a corporate tax, the fund would compensate for damage caused by companies that have declared bankruptcy or insolvency, saving the state millions. The country’s leading business owners association EK says the Ministry’s proposal blows things out of proportion and would prefer to see an enhancement of the current environmental liability insurance system.

Tehtaan piipusta tulee savua.
Image: Mika Moksu / Yle

Since 1998, companies in Finland whose operations pose an environmental risk are required to take compulsory insurance to cover any potential environmental damage their operations may create. The insurance does not cover preventative measures, however, which means the state is still often left with the bill.

Companies in Finland have contributed close to 40 million euros to the compulsory environmental liability insurance pot over the last 15 years. During the same period, only six environmentally-damaging incidents took place, four of which were entitled to remediation from the insurers. All in all, only 400,000 euros of damage was covered, just one percent of the money paid into the system.

The Ministry of Environment launched an investigation into the reform of its environmental liability system after the government was forced to clean up the Avilon viscous fibre plant in the southern city of Valkeakoski after it declared bankruptcy in 2013. The explosive carbon disulfide in the plant’s tanks had to be decontaminated, costing taxpayers 4.5 million euros. Three other similar cases have occurred in the last few years, leading to a final price tag of 7 million euros.

Businesses protest increased corporate taxes

Insurers and associations representing Finland’s business owners are united in their opposition to any new corporate taxes.

“The knowledge that there is a pile of money set aside somewhere that would easily offset expenses should in no way lead to negligence,” says Satu Räsänen from the leading business lobby EK. She says the Ministry’s suggestion for a 50-million-euro cap is disproportionate.

“Our biggest concern with this arrangement is the possibility that we will be saddled with a bureaucratic, expensive and slow system that is out of proportion with the problem. Environmental disasters are rare in Finland, and when they do occur, they tend to be small in nature,” she says.

The 'polluter pays' principle

Tapio Määttä, Professor of Environmental Law at the University of Eastern Finland, disagrees, saying the proposed system would better subscribe to the principle of ‘polluter pays’, as the fund’s assets would only be collected from companies that pose an environmental risk.

Large-scale disasters like the ongoing saga of Finland’s Talvivaara nickel mine, would not, however, be covered by the fund.

“Talvivaara is of course an extreme example. Nothing on that scale has happened before,” he says.

“Instead of the taxpayers, it is more socially equitable to target this relatively minor economic burden to those few companies and operators that actually carry out activities that pose a polluting risk,” says Määttä.

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