Finnish Commerce Federation for the Government’s mid-term review:  Reducing the taxation of earned income and opening up the market to accelerate economic growth 

Finland’s economic growth must be accelerated, and this requires the strengthening of purchasing power and the service economy. The Finnish Commerce Federation proposes measures to improve Finns’ purchasing power for the Government’s budget framework session. According to the federation, reducing income tax at all income levels during the government’s term would be the fastest way to stimulate the economy and strengthen the service sectors. The commerce sector is one of Finland’s largest employers and pillars of economic support, accounting for approximately 50 per cent of the VAT accumulated from domestic sales.

“Strengthening structurally weak purchasing power by one percentage point through reducing labour taxation at all income levels is the quickest way to boost the economy. Improving the competitiveness of companies operating in Finland would also bring more value-added tax revenue to the state,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

Starting intensive monitoring of distance selling shipments

The commerce sector is in fierce competition, especially with international online marketplaces. Numerous test purchases have shown that popular Asian online marketplaces sell products that do not meet the EU product safety requirements, for example, in terms of chemical quantities. Online stores and platforms trading products from outside the EU gain a significant competitive advantage from the EUR 150 duty-free limit. Companies selling on the platforms often also avoid waste management fees.

“When it comes to influence in the EU, we need to address the products entering the internal market from third countries by holding the platforms responsible for the products they sell. As an immediate measure, the Government should decide on the launch of an intensive monitoring project and grant the necessary funding for it in the mid-term review. The project would provide us with a situational picture and information on the extent of the phenomenon, which would support the planning of the necessary additional measures. At the same time, we could raise consumers’ awareness of product safety risks and other adverse effects,” Luoto says.

Regulatory reforms for the benefit of competition and consumers

In accordance with the Government Programme, the Government has ordered a report on the liberalisation of the sale of wines with an alcohol content of up to 15% in grocery stores, and, according to the Finnish Commerce Federation, a decision should be made on allowing their sale.

The development of alcohol legislation should be viewed from a broader industrial political perspective. The development should take into account how the reforms can promote domestic tourism, the restaurant industry, agriculture and exports in addition to trade, while also increasing competition and tax revenue.

“Previous reforms show that Finns are ready for the next reform of the Alcohol Act. Even though the retail hours have been extended, the per cent limit for alcohol sold in stores has been raised and take away sales rights have been increased, alcohol consumption is still declining,” Luoto notes.

The current pharmacy system is not cost-effective and causes significant costs for the state and consumers. According to a report by the Finnish Commerce Federation, a more efficient system based on the Swedish model could bring annual savings of up to EUR 250 million.

“The reform of the pharmacy system will be necessary in the future from the perspective of both consumers and public finances. In the mid-term review, the Government should decide on conducting an official report on the effects of the reform,” Luoto suggests.

Other decisions supporting economic growth

The cuts in tax credits for household expenses have weakened consumers’ opportunities to carry out renovations and have made the situation in the construction sector more difficult. The Finnish Commerce Federation proposes the restoration of the tax credit for household expenses and that it would cover all energy efficiency renovations. This would support both household investments and the badly affected construction and interior design sector.

For the automotive sector, the Finnish Commerce Federation hopes that the Government will reinstate the car scrapping bonus scheme, as it would promote the renewal of Finland’s car fleet and support the achievement of emission targets.

A smooth and rapid approval of investments is crucial for economic growth and the creation of jobs. Reducing bureaucracy and speeding up permit processes can accelerate the implementation of domestic and foreign investments.

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