Finland Cuts Deficit with Tax Hikes

August 31, 2012 Taxation in Finland

Prime Minister of Finland Jyrki KatainenHELSINKI – Finland will raise taxes and cut spending in an effort to close the national budget deficit and maintain its stable financial position.

On August 30th the six party coalition government of Finland concluded a meeting in Helsinki, at which discussions were held on how to narrow the national budget deficit to within 1 percent of the country’s GDP by the end of next year.

At the meeting an agreement was reached to increase the rate of the national value added tax in 2013 by 1 percent to a level of 24 percent to raise tax revenues by EUR 1.3 billion per year, and to implement a new tax on the profits of banks.

In an effort to further cut down the growth of the national debt, the government agreed to cut public spending and expenditures.

The government will also allocate approximately EUR 940 million to fund new projects to encourage greater levels of exports out of Finland, with the aim of boosting production and consumer demand for Finnish products.

According to current estimates, Finland’s cumulative national debts will reach EUR 96 billion by the end of 2013, or approximately 47 percent of the GDP.

Commenting on the outcome of the meeting the Prime Minister of Finland Jyrki Katainen said that the government will halt the growth of Finland’s debts by the year 2015, but conceded that this goal will required the government to implement spending cuts and tax hikes.

The government’s proposed budget will be put forward for debate in Parliament on September 17th.

Photo by Valsts kanceleja