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Income taxation
Employment prospects, household purchasing power and domestic demand will be promoted by easing the tax bases on earned income. These tax changes aim to offset the tightening effect on taxation that the rising earnings level and impending increases in wage-earner contributions will create. The taxation of those with very low income will be eased by raising the maximum limit in the low income allowance in local government taxation. As outlined in the Government Programme, the taxation of pensioners will be alleviated by ensuring that the tax rates on pension income do not exceed those of earned income.
Taxpayers may request that shared business income and agricultural income from a deemed partnership be taxed entirely as earned income. It is proposed that capital gains from fixed assets are made tax-exempt when the assets are handed to the State or State enterprise as a nature reserve.
The tax-exempt sum for employer-subsidized public transport tickets is to be raised and specified in terms of euros. The tax-exempt sum of employer-subsidized loans is to be tied to commonly used reference interest rates instead of the base rate. Irrespective of company form, taxpayers may deduct travel expenses between home and the workplace as stipulated in the Income Tax Act.
To ease temporary liquidity problems in companies caused by the economic situation, the size of surtaxes, penalty interest and interest on delayed payments is to be lowered by one percentage point in 2010 on a temporary basis.
Most of the changes are to be implemented on taxation from 2010 onwards.
Inquiries: Ms Fransiska Pukander, tel. 358 9 160 34736 (changes in tax bases) and
Mr Ilkka Lahti, tel. 358 9 160 32199 (all other changes in income taxation)
Annual vehicle tax on vans to be converted into one based on emissions
The basic tax on vehicles levied on the basis of carbon dioxide emissions will be made to apply to vans in the same way as to passenger cars. Vans without emissions information are to be taxed on the basis of the overall volume of the vehicle.
The pertinent legislative provision is due to enter into force in March 2010 at the same time as applicable changes related to passenger cars are to be introduced. Owing to the moving 12-month tax period for vehicle taxes, the first day when the taxes can be levied using the new tax bases is March 2011 in any case. No changes are proposed to the existing tax on diesel-driven vans.
Inquiries: Ms Merja Sandell, tel. 358 9 160 33061
Excise duties
To abate the health hazards of tobacco, excise duties on tobacco products will be raised from the beginning of 2010, so that the duties on cigarettes and other tobacco products are to be raised by 5%, and duties on loose tobacco are to be increased by 15%. A duty on sweets will be introduced in July 2010 and the duties on soft drinks will be raised.
Inquiries: Ms Jenni Oksanen, tel. 358 9 160 32501
Changes in value-added tax rates
It is suggested that value-added tax rates be changed as of 1 July 2010. The proposal is to raise the general VAT rate from 22% to 23%. The VAT rate on foodstuff and fodder is to be increased from 12% to 13% and that on restaurant and catering services is to be brought down from 22% to 13%, so that the same tax rate would apply to foodstuff and restaurant meals. The VAT rate on books, medicine, cultural and sports services, passenger travel, accommodation services, and barber and hairdresser services, which is another lower rate of taxes, is to be raised from 8% to 9%.
Inquiries: Ms Tiina Maisala, tel. 358 9 160 33205
Budget decision complement spending limits decisions to secure local government services
The government will use both the spending limits decisions and the budget proposal to alleviate the effects of the economic downturn on local government finances. The overall impact on local government of the measures included in the budget proposal is EUR 204 million more than this year. The effect on local government expenditure, revenue and tax bases have all been taken into account.
It was already previously decided in the spring spending limits decision that the local government share of corporate income taxes would be raised, the national pension insurance contribution of employers would be revoked and the thresholds for immovable property tax rates would be raised. Investment subsidies have also been increased this year. Of these measures, a higher share of corporate income taxes in local government and the abolition of the national pension insurance contribution will ease financial pressure in local government by nearly EUR 470 million this year alone, and by raising the lower thresholds for immovable property taxes pressure will ease for an equivalent of about EUR 50 million next year.
Central government transfers to local government for basic public services will be brought together under one umbrella in the Ministry of Finance at the beginning of 2010. These imputed government transfers amount to around EUR 7.7 billion, accounting for just over a third of all local government expenditure on basic public services. In addition to these, local government authorities receive other government aid to the tune of EUR 933 million. The principles for granting central government transfers to local government will remain unchanged except in the case of pre-primary and basic education, which will convert to transfers based on age groups.
A full index adjustment of about EUR 209 million will be made to central government transfers to local government and an additional adjustment of around EUR 30 million for 2010. Tax losses, amounting to around EUR 375 million, caused by reductions on local government taxation will also be compensated in full. Altogether EUR 30 million in central government transfers will be allocated to very sparsely populated municipalities, the archipelago and Sami communities. Local government mergers will be supported for a total of EUR 114 million, and municipalities in financial difficulties will be assisted by altogether EUR 20 million.
Central government transfers for start-up projects in schools total EUR 56 million and start-up projects in libraries EUR 5 million. Ex post financing authorisation for general education will be increased by EUR 48.5 million. Government aid towards projects in developing health care and social welfare services in local government will be boosted by EUR 28.6 million. Ex post financing authorisation of EUR 10 million will be allocated to repair mould-damaged health centres, day-care centres and homes for the elderly.
Inquiries:Mr Rainer Alanen, tel. 358 9 160 32203
New Regional State Administrative Agency
The new regional state administrative agency is set to be launched at the beginning of next year. The agency fosters regional parity by executing all legislative implementation, steering and supervision functions in the regions. It strengthens the implementation of basic rights and legal protection, access to basic public services, environmental protection, environmental sustainability, public safety and a safe and healthy living and working environment in the regions.
The tasks of the regional state administrative agency consist of those of the existing state provincial offices, environmental permit agencies, regional environmental centres and occupational health and safety districts. A Government proposal on legislative provisions governing regional state administrative reform is being deliberated in Parliament.
Around EUR 48 million is to be allocated towards operating expenses for the regional state administrative agency, consisting mainly of transfers from the administrative branches of the Ministry of Finance, the Ministry of Social Affairs and Health and the Ministry of the Environment.
Inquiries: Ms Tarja Hyvönen, tel. 358 9 160 32231
Service centre mergers
Four central government administrative and human resources management service centres will be brought together under the mandate of the Ministry of Finance on 1 January 2010 to create one agency operating in a number of branches across the country. The services centres to be merged are the Administrative Service Centre for the Judicial System, the Shared Service Centre of the Ministry of the Interior, the Service Centre of the Ministry of Defence and the Service Centre of the Finnish Treasury.
Inquiries:Mr Tomi Hytönen, tel. 358 9 160 32565
Ministry of Finance P.O BOX 28 FIN-00023 GOVERNMENT Tel. +358 9 160 01 E-mail: valtiovarainministerio@vm.fi