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Tax Effects of the Budget Framework for 2013-2016
The Finnish Government has agreed on the budget framework for the next four years. To balance the state economy, the Government has decided on economic measures of EUR 2.7 billion. 1.5 billion of the total amount will be raised by straining taxation and 1.2 billion by cutting expenses. The Government has also agreed on a supplementary budget which includes tax incentives to support economic growth. Taxand Finland discusses the budget forecast looking at what multinational taxpayers should watch out for over the next few years.
Balancing tax measures
The majority of the balancing effects are carried out by an increase in VAT rate and by freezing the inflation adjustments of personal income taxation. The Government's decision to increase value added tax by 1 percentage unit is supposed to raise approximately EUR 750 million. Accordingly, the Finnish VAT rate will become 24 %, which is still below the Scandinavian average. For example, Sweden and Denmark are already applying the EU maximum rate of 25 %.
Growth supporting tax measures
In its supplementary budget, the Government utilises tax incentives to support growth and employment. A new tax incentive for R&D actions, which grants tax compensation depending on the labour costs connected to the R&D operations, is one of these incentives. Another tax related measure is to accelerate investments by allowing double depreciations for a fixed term ending in 2014.
Taxand analyses the full budget framework at agreed for the next four years
Other forthcoming tax measures include an increase in energy tax and restrictions in mileage allowance. Also a few measures already entered into the Government's program will soon become applicable. A so called bank tax will become effective in 2013 and a windfall-tax in 2014. Tax payers should make themselves familiar with the announcements and make note of key dates so they can keep informed of changes as they happen.