Finnish government sent a press release on the outcome of supplementary budget discussions. The governing parties agreed on 2.7 billion Euros in savings through 1.5 billion in tax increases and 1.2 billion Euros in cuts. The outcome is a disappointment to entrepreneurs as they had been hoping for more cuts and less tax hikes.
The compromise again highlights the current dynamic where the left-wing Social Democrats are able to use their leverage against the largest party the conservative National Coalition to tilt the balance of power. This also means the measures generally do not go as far in either direction as would happen if the government were decidedly left or right-leaning.
Some listed companies will be hit by these measures. A windfall tax appears to be coming from 2014 onwards, and it would have a slight effect on Fortum’s (OMX: FUM1V) after tax earnings. A tax on banks will be introduced from 2013. It is not yet clear whether this will hit financial transactions, earnings or all operations. Value Added Tax is increased by one percent across the board for all separate tax levels, affecting certain sectors more than others.
A so called solidarity tax will tax those earnings over 100 000 Euros per annum at a higher clip. This is supposed to be temporary but it is very hard to see a future government willing to remove this. Experts and highly educated people easily can and often should earn in excess of that sum and they are naturally irate. Companies hiring expert personnel may see this as an incentive to move operations overseas. Those getting an inheritance of over 1 million Euros will also see a larger portion of it disappear in taxes.
Obviously you are quite ignorant of Finnish matters if you seriously think "experts and highly educated people" are likely to earn anything near 100k. This tax concerns only a handful of people, which makes it largely cosmetic. It is sheer left-wing populism with a negligible fiscal impact.
ReplyDeleteNow, should large numbers of "experts and highly educated people" suddenly get this 120-150% raise, I predict it would take them more than the remainder of the electoral term to grow irate.
Another matter entirely is the current rate of inflation, which would probably propel quite a few people into this group in case inflation in Finland concerned salaries as well as prices.