HELSINKI: The Government of Finland plans to reduce the tax burden on labor as part of its budget plan for 2016, although a number of indirect taxes will rise with the Government expecting to post its eighth consecutive annual budget deficit.
The Ministry of Finance has announced that the taxation of labor will be eased for low- and middle-income workers by increasing the earned income deduction by EUR450m (USD500m) in 2016. According to the Government, this measure will “promote employment and boost purchasing power” amid subdued economic conditions.
However, there will be several tax increases next year, mainly in the area of indirect taxation. These include the tobacco tax, motor vehicle tax, waste tax, and the tax on heating. Additionally, the deductibility of home loan interest will be reduced further, and the solidarity tax will continue. Introduced in 2013, the solidarity tax amounts to a 1.5 percent surtax on personal income of more than EUR100,000 per year.
The budget plan is expected to increase tax revenues by 2.5 percent in 2016, or by approximately EUR1bn, compared with 2015. However, the Government expects a budget deficit of EUR5.3bn next year, slightly higher than the predicted deficit of EUR5.2bn in 2015.
