Finnish government pledges tax reductions for low- and middle-income workers amidst concerns

The Finnish government has pledged to reduce taxes for low- and middle-income workers, although this commitment has raised some concerns. The promise was made in a Ministry of Finance statement in September, which seems contradictory to a draft proposal issued in June. The draft suggested that while taxes for low earners would decrease, taxes for middle and high-income earners would see a slight increase.

The proposed change aims to tighten tax progression, meaning that as incomes rise, tax rates will increase accordingly. According to calculations by the Taxpayers’ Union, not all low earners will experience a reduction in taxes; some may even see a slight increase. Mikael Kirkko-Jaakkola, the Union’s chief economist, noted that this inconsistency arises mainly from the removal of the earned income deduction and an increase in the work-related tax deduction. He stated, “While this individual reform is intended to be neutral, at certain income levels, it may raise taxes, while at others, it may slightly reduce them.”

Tampere University economics professor Jarkko Harju assessed that overall tax changes would not be significant across any income bracket. Although many low earners will benefit from slightly lowered taxes, increases in value-added tax and cuts to housing benefits significantly impact their purchasing power. He emphasized the need to consider the entire structure of consumption taxes, income taxes, and social welfare packages.

Most families with children will benefit from an increase in the work-related tax deduction of 50 euros for each dependent child, with single parents receiving double the benefit. However, high-income earners will not receive this additional deduction.