Commerce sector messages for the Government budget session: promote purchasing power, provide incentives for the green transition and boost local bargaining

The past COVID-19 year has shown how significant the role that domestic demand and the commerce sector plays in the Finnish economy and employment.

“We should continue to foster consumers’ purchasing power also while adapting the economy in order to ensure continued economic growth and jobs in the sector. This will also alleviate the negative impacts the COVID-19 pandemic has had on the service sector,” says Mari Kiviniemi Managing Director of the Finnish Commerce Federation.

Cutting taxation of work at all income levels is key to mitigating the tax wedge that consumer services multiply. Multiplied tax wedges increase the price of services and consumer goods sold in Finland and weaken the purchasing power available. Purchasing power plays a considerable role in steering consumers’ decisions between inexpensive Asian online stores and high-quality Finnish ones. Domestic digital commerce gained market share from foreign e-commerce during the COVID-19 pandemic. Fostering purchasing power supports the continuation of this trend.

The tax credit for household expenses is another way to comprehensively promote consumption.

“Expanding the share of work of the tax credit for household expenses from 40 per cent to 60 per cent and increasing the credit from EUR 2,250 to EUR 5,000 would be a rapid and effective recovery measure. It would also combat the shadow economy and speed up increased energy efficiency of buildings as well as the transition to clean energy sources,” Kiviniemi states.

More speed for low-carbon work by decreasing service industry electricity tax

Lowering the service sector’s electricity tax to a level equal with industry is key for speeding up the green transition in the sector, including commerce.

“This would promote electrification of the commerce sector, impact the carbon footprint considerably and enable reaching carbon neutrality goals by the year 2035. It would also bolster the competitive strength of Finnish commerce, which is facing intensifying international competition. Currently, the service sector pays over 40 times as much electricity tax compared with industry,” says Kiviniemi, summarising.

Finland’s carbon neutrality target will not be reached unless all cost-efficient production sites for renewable energy are taken into use. The commerce sector still has a lot of unused roof surfaces and land areas that can be harnessed for the production of renewable energy. The carbon-neutrality objective of the commerce sector could be promoted by increasing the minimum limit of tax liability for small-scale production of renewable energy, in accordance with the European Union’s state aid rules.

Local bargaining to speed up reaching employment objectives

A practical measure that can be deployed rapidly to help in reaching the employment objective set by the Government is promoting local bargaining. The COVID-19 pandemic has highlighted the need to find company-specific solutions also when it comes to questions related to employees. The impact of the COVID-19 pandemic, economic outlook, customer needs and competitive situation differs greatly between various commerce sector companies. Added bargaining opportunities improve the companies’ competitive strength by increasing flexibility and cooperation between the company and its employees. This will result in increased productivity which increases employment.

Promoting local bargaining would require the Government to make decisions for amending labour legislation to allow company-specific local agreements.

“Company-specific bargaining legislation should be piloted by allowing local agreements regarding Sunday bonuses in the specialty goods trade as part of a COVID-19 exit strategy. Such a pilot project would allow assessing how local bargaining impacts competitive strength and employment,” Kiviniemi suggests.

Further information: Mari Kiviniemi, Managing Director, Finnish Commerce Federation, tel. +358 (0)50 511 3189, mari.kiviniemi(at)kauppa.fi