Structural reforms needed in the budget framework session – an efficient market improves consumers’ purchasing power  

According to the Finnish Commerce Federation, this is the last chance to make the necessary structural reforms in the national economy to enhance the functioning of the market. An efficient market benefits both consumers and state finances. Now is the time, in accordance with the Government Programme, to deregulate alcohol sales and reform the retail sales system of pharmaceuticals.

“Structural reforms designed to increase efficiency must be supported by regulations that promote responsible activities. They also provide leeway in state finances and even enable appropriately scaled tax hikes without compromising consumers’ purchasing power,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

According to calculations commissioned by the Federation, the structural reform of the retail distribution system of pharmaceuticals would bring the combined annual savings of the state and consumers up to EUR 250 million. It is possible to strengthen state finances by EUR 128 million, while the purchasing power of consumers would improve by EUR 124 million per year. The savings would be created in stages so that they would be achieved in full towards the end of the budget planning period.

The prerequisites for an effective pharmaceutical sales system, in accordance with the Swedish model, are the reduction of the regulated sales margin of pharmacies, i.e. the price regulation of pharmaceuticals, to the level of Sweden, the significantly more efficient procurement of medicines, diverse competition and the liberalisation of pharmacy ownership.

“Several studies have shown that the Finnish pharmacy system is expensive for consumers and society. The retail distribution system of pharmaceuticals cannot be excluded from the discussion on savings; structural reforms must be urgently addressed,” says Luoto.

VAT increases would affect Finnish work and purchasing power

Above all, value added taxation burdens the work performed in Finland, even when the actual product to be sold is manufactured elsewhere. For example, domestic costs can account for more than 80 per cent of the price of a garment manufactured in Asia, most of which are labour costs.

Increasing the standard VAT rate would increase the already substantial price difference between a product sold in Finland and, for example, a similar product sold in an Asian online store.

“Increasing the standard VAT rate would be a major blow to the domestic specialty and household goods trade,” says Luoto.

On the other hand, raising the VAT rate on food would further weaken the purchasing power of Finns, especially if it was not even compensated for with income transfers.

“Increasing VAT on food and the shrinking of purchasing power would be reflected not only in the domestic food supply chain but also in other consumer services and specialty goods trade as there would be less room for them in people’s consumer baskets,” says Luoto.

RDI funding must be reformed and directed more strongly to the trade and services sectors

Additional RDI funding should be allocated more strongly to applied research, the deployment of technology and the practical needs of service industry and trade companies. Public RDI funding and the funding models of Business Finland, for example, must be directed to projects that improve the productivity of the private service sector and diversify the economic structure of Finland.

“If RDI funding is not reformed and allocated more strongly to the trade and service sectors and SMEs, Finnish specialty goods and wholesale trade and the services supporting them risk falling behind in international competition,” says Luoto.

Company restraining orders make the working environment in commerce safer

Customers’ inappropriate behaviour in shops, harassment of staff and violence are an everyday reality, and these incidents are becoming more and more serious in nature.

According to the Finnish Commerce Federation, the employer needs a company restraining order tool without delay in order to ensure the occupational safety and well-being of the staff.

“At the same time, a company restraining order would be an important investment in the general safety of everyday life,” says Luoto.

Further information: Kari Luoto, Managing Director, Finnish Commerce Federation, tel. +358 (0) 400 688 708, kari.luoto(at)kauppa.fi