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Steady increase in declarations of no taxable income

Finland's Tax Administration reports that 15,000 more eligible taxpayers declared no taxable income in the last two years, putting the total past 160,000 in 2017.

Kolikoita kädellä.
Image: Henrietta Hassinen / Yle

The number of eligible taxpayers who reported no taxable income in Finland has risen by 15,000 in the last two years to a total of 161,000 in 2017.

"Most of the people declaring no taxable income are foreigners who have come to Finland to work or study, or else they own real estate or property in Finland […] People arrive in the country to do work, and then they leave without filing a change of address, so we don't know that their tax liability has ended," says Finland's Tax Administration's senior advisor Ville Niemeläinen.

Niemeläinen says that the second-largest group in this category is Finnish citizens that either make ends meet on tax-free income sources like social benefits, or are economically reliant on their parents or spouses.

"The third-largest group is comprised of Finnish citizens who have gone abroad to study or work," he says.

Most of the people that declare no taxable income each year are in their twenties. Very few are past the age of 40.

Growing numbers make do with tax-free benefits

Pensioners and people living on unemployment benefits may have very small annual incomes, but they are still taxable. Both groups are therefore not included in tallies of people declaring no taxable income.

Most of the zero income cases can be traced to Kela, Finland's social benefits administrator. The last-resort form of state aid known as basic allowance is tax-free, as are housing benefits and state-sponsored payments in divorce cases where there is no parent assuming maintenance liabilities. Applying for tax-free benefits like this is often the next course of action for people who do not qualify for unemployment benefits, for example.

"The terms and conditions for obtaining unemployment benefits end up being the most common reason people end up taking advantage of these last-resort forms of aid. For whatever reason – waiting periods or the like – they are not entitled to unemployment benefits. Typically, they tend to be middle aged Finnish men who live alone," says Kela researcher Tuija Korpela.

According to the tax authorities, there were 8,400 people making ends meet long-term on tax-free social benefits last year.

A person living alone and collecting social benefits like the basic allowance and housing aid receives 1,031 euros per month on average. A single unemployed parent of one child who receives post-divorce child support from the state has a monthly income of 1,733 euros on average, when basic allowance, housing aid, child allowance and child support sums are combined.

Even more pay no tax because of deductions

People without taxable incomes aren't the only ones not paying taxes each year, as deductions can also cancel out tax amounts for many taxpayers.

"There are about 180,000 people who declare deductions that in practice bring their taxes due down to zero," Niemeläinen says.

Combined with those who had declared no taxable income, this brings the overall total of people who paid no taxes in Finland in 2017 to approximately 340,000.

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