In January 2002, the Finnish social partners expressed their views on the country's taxation levels, in the light of work being carried out to prepare future government tax policy. According to the Confederation of Finnish Industry and Employers (TT), the Finnish taxation level is so high that many of its large member companies are considering moving their head offices to other countries. The trade unions, while recognising that it is important to employees that taxation should be moderate, nevertheless defend taxes as the financial basis for the welfare state.
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In January 2002, the Finnish social partners expressed their views on the country's taxation levels, in the light of work being carried out to prepare future government tax policy. According to the Confederation of Finnish Industry and Employers (TT), the Finnish taxation level is so high that many of its large member companies are considering moving their head offices to other countries. The trade unions, while recognising that it is important to employees that taxation should be moderate, nevertheless defend taxes as the financial basis for the welfare state.
The deputy managing director of the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT), Tarmo Korpela, stated in January 2002 that - due to the high level of taxation in Finland - several of its large member companies are re-evaluating the present location of their head offices, with the possibility of moving them abroad. This followed a comment by Jorma Ollila, the chief executive of Nokia, the Finnish telecommunications multinational, in a TV interview in November 2001. Mr Ollila stated that Finland's high taxation is intolerable in a long-term perspective, by which he meant five years. Subsequently, in a press interview in January, Vesa Vainio, the chair of the board of Nordea, the Nordic banking group, demanded that Finland should lighten its taxation so that the country could maintain its competitiveness. According to Mr Vainio, company taxation should be cut from the present 29% to 25%, while the highest marginal income tax rate should be cut from the present 59% to 50%. The same levels of taxation are advocated by TT.
In a press interview in January, the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), the Confederation of Unions for Academic Professionals ((Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) and the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) replied to the statements of TT and the company executives.
The manager of SAK, Eero Heinäluoma, said that the employers' comments have caused considerable surprise in his organisation. In his view, company taxation in Finland is very moderate, clearly below the EU average. Concerning income tax, SAK wants to decrease the tax level but with an emphasis on those on low and middle incomes. Further, taxation on capital and on income should be treated more equally.
The chair of STTK, Mikko Mäenpää, stated that he found the employers' standpoint very odd, and alleged that it could be interpreted as 'bullying'. He expressed particular surprise at the view of Nordea, referring to the banking crisis at the beginning of the recession of the early 1990s, when the banks were rescued from bankruptcy with the help of tax revenues in the form of state-granted capital support. After these efforts to beat the recession, the financial results of the banks have improved to an excellent level and productivity has increased. In relation to wage taxation, Mr Mäenpää believes that wage earners' income tax should be at the European average level. On the other hand, STTK is worried about the functioning of the Finnish welfare system, which will not work if there is not enough tax revenue.
The chair of AKAVA, Risto Piekka, sees the threat of companies moving their Finnish head offices to other countries as real. As a counter-argument to the demands for tax reductions, he points out the benefits offered by the Finnish system - the well-educated labour force, good infrastructure, high level of technology and good public services, which are all of importance for competitiveness. In his view, it is important for Finland to prevent unhealthy tax competition between EU countries. He wants the EU to prescribe minimum taxation levels. AKAVA is also pushing for a cut in income tax to the EU average. However, according to Mr Piekka, this reduction should take place within such a framework that the core public sector welfare services can still be provided.
The ongoing debate between the social partners is linked to the preparation of the tax policy for the next government programme, a task being carried out in specialist working groups set up by the present government.
Eurofound recommends citing this publication in the following way.
Eurofound (2002), Social partners discuss taxation, article.
