Finland introduces VAT increase raising concerns for entrepreneurs and job security

The upcoming increase in value-added tax (VAT) is expected to impact entrepreneurs in various ways. While some businesses can directly pass the tax hike onto consumers, many, particularly solo entrepreneurs and service-oriented companies, face significant challenges. Jari Haapaniemi, chairman of the Pirkanmaa Entrepreneurs Association, states that most product-selling businesses can raise their prices accordingly. However, they still bear the burden of additional work, such as updating price lists and offers mid-year.

The new VAT rate raises concerns about potential job losses in sectors heavily employing young people and women. Sera Palttala-Usher, a cleaning service entrepreneur, fears she may need to lay off employees as she anticipates losing about 20% of her residential cleaning clients this fall due to the price increase.

Finland’s government, led by Prime Minister Petteri Orpo, decided to implement this VAT hike during a framework meeting in the spring, which is expected to generate an extra billion euros for the state. Starting from September, the general VAT rate will rise from 24% to 25.5%. While reduced VAT rates remain unchanged for now, certain categories will see increases in the future, such as the rise in rates for medicines and books beginning in January 2025.

During the transition, many businesses will face additional administrative tasks, such as updating contracts and ensuring their accounting software can handle the new VAT percentages. Experts warn that not all systems may be ready, and small businesses must act quickly to address potential software issues to avoid billing complications. Overall, the impending changes leave many entrepreneurs anxious about their financial viability and operational continuity.