Juha Ristamäki
The main rule should be to lower those taxes that have the greatest dynamic effect on the economy, writes Juha Ristamäki.
Prime Minister Petteri Orpo and Working Group Leader Risto Murto on Thursday in Kesäranta. Fanni Uusitalo / Government Office
On Thursday, Prime Minister Petteri Orpo (kok) officially kicked off the process of creating new measures to boost the Finnish economy.
Risto Murto, CEO of the pension company Varma, has been appointed as the chairman of the growth working group. The task is to produce concrete solutions for the government’s mid-term meeting next spring.
Better late than never.
Orpo’s board had a clearly too rosy view of the economic situation at the beginning of the board’s term. It was supported by the Ministry of Finance’s optimistic views on inflation and falling interest rates, among other things.
The international economic situation has been bad, so the government has been stuck in place with its cuts and labor market measures. The effects of dismantling incentive traps and labor market reforms will be visible in 2026 at the earliest. Unemployment has only increased.
In addition to the adjustment of six billion euros agreed in the government negotiations, the government has made cuts and tax increases of three billion euros more, but even that does not seem to be enough.
The government’s deficit target is slipping away.
However, there will be light at the end of the tunnel next year. Economic growth can be expected in our export regions, although the growth figures are still not encouraging.
The new data, for example, on Germany’s and the Eurozone’s purchasing managers’ index are, of course, reasonably worrying in terms of Finnish export growth and economic recovery – so there are enough threatening images.
Finance Minister Riikka Purra (ps) also stated on Thursday at the Central Chamber of Commerce’s big tax day that she will no longer propose new tax increases this election period.
If we still need to adapt, then we will cut more, says Purra. With this economic growth, even the road is starting to be very difficult to go further.
It is likely that the growth working group appointed by the government will propose significant changes to the Finnish tax system.
This is also the state of will in the government, at least the prime minister’s party in the coalition. It is known there that this government base is one where a tax overhaul favoring investment and entrepreneurship is possible.
The problem is that Finland’s position as an investment destination has weakened.
According to Murro, this is due to the geopolitical situation, which is accompanied by a change in trade flows (Eastern trade has ended), in addition, state subsidies and protectionism have made Finland’s small and open economy suffer.
Therefore, the government is now under pressure to do a little more to speed up investments than is done in the comparison countries. Investments are important, because they renew the economy and create a basis for growth.
Risto Murto stated on Thursday that taxation and investments are ultimately connected. More precisely, he did not want to anticipate the methods presented by the working group yet.
However, the main rule should be that the taxes with the greatest dynamic impact on the economy are reduced.
On the table are guaranteed to be a possible reduction of the corporate tax, an increase in tax credits for new investments, a tax relief or tax exemption model that attracts foreign investments, the removal of tax barriers for business arrangements, the so-called Estonian model in the taxation of limited company profits, and so on.
Prime Minister Orpo has assured that the government has the will to move quickly, if the right medicines for growth are found. This is how it should be, the government has wasted too much time here.
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