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PM: Government offers half a billion in tax cuts

Prime Minister Juha Sipilä is pushing for a final agreement on the competitiveness deal with unions and employers on Friday. The cabinet offered some 515 million euros in conditional tax cuts on Thursday. The Taxpayers Association of Finland estimates that this might raise the average wage-earner's purchasing power by around five euros per month.

Jari Lindström, Juha Sipilä ja Alexander Stubb
Jari Lindström, Juha Sipilä and Alexander Stubb presented the tax relief plan on June 2. Image: Petteri Paalasmaa / AOP

The Finnish government has been meeting on Thursday to weigh the status of last-minute negotiations on the so-called competitiveness pact. Ministers have been trying to determine if the labour market agreement will cover a sufficient proportion of the workforce and companies – and how much tax relief it can offer as a carrot to seal the deal with unions and employers.

In a Thursday afternoon press conference, the cabinet offered some 515 million euros in conditional tax cuts.

Around midday, Sipilä spoke briefly to reporters as he arrived at Helsinki's House of the Estates for a meeting of the National Advisory Board on Romani Affairs.

He promised that the cabinet would finalise its decision on how much taxes could be cut on Thursday afternoon.

"The government has been considering the tax decision and will continue that in the afternoon, but you can be assured that we'll reach a decision," he told Yle.

On Thursday afternoon, Finance Minister Alexander Stubb said unions representing some 45 percent of the nation's workers had signed on to the deal. That includes all public-sector employees.

Big unions still on the fence

Sipilä has stipulated that in order for the national labour market pact to fly, more major unions must approve it.

Still undecided are the Metalworkers' Union, which is the biggest industrial union with more than 140,000 members, and the Trade Union Pro, representing some 120,000 clerical workers.

The Federation of Finnish Technology Industries, an employers' group, was negotiating with Pro on Thursday afternoon before talks with the metal union scheduled to begin at 6 pm.

Meanwhile, another key holdout is the Service Union United PAM, with about 230,000 members, more than three quarters of them women. Its board is to discuss the proposed pact on Friday.

"Unrealistic" tax demand

The union has been demanding tax cuts of one billion euros – which the government says is unrealistic. Interviewed on Yle radio on Thursday morning, former employment minister and SAK labour confederation boss Lauri Ihalainen agreed, arguing such a tax rollback would trigger further cuts to services, which would be counterproductive for working families.

PAM chair Ann Selin said that the government's tax cut offer was "a step in the right direction" although it fell well short of her union's demand.

The competitiveness pact is aimed at lowering labour market costs and rigidity in hopes of investing foreign investment that is now going to neighbouring countries seen as having more favourable business climates. That in turn would hopefully bring new jobs and kick-start the Finnish economy, which has been in the doldrums for years.

€5 extra per month in pocket?

On Thursday evening the Taxpayers Association of Finland published its calculations as to what the government's offer would mean in practice.

An employee earning an average salary of 3295 euros a month would see his or her tax rate edge down by 3-tenths of a percent from 31.1 percent to 30.8 percent, if the competitiveness pact goes through and covers at least 90 percent of the nation's workforce, the group says.

Purchasing power could rise by 0.2 percent in 2017, it adds. For an average-income wage-earner, this would mean an improvement in buying power of some 60 euros.

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