Finnish Commerce Federation: Growth in the retail sector has only just begun – new tax increases would threaten the turnaround in employment

The retail sector’s VAT-free sales volume has increased since September last year. Employment in the sector and the hours worked also increased in the third quarter of the year when compared to the previous year. However, the long-awaited turnaround is still fragile.

”The potential cuts to purchasing power through increasing taxation threaten to disrupt the development of employment that has begun in the retail sector. Public finances cannot be built on a sustainable foundation by suppressing private consumption,” says Jaana Kurjenoja, Chief Economist of the Finnish Commerce Federation.

Consumers have already participated in tax action

The VAT increases in 2024 already cut the purchasing power of households. According to the Finnish Commerce Federation’s calculations, they reduced the tax-free purchasing power of a wage earner earning EUR 4,000 per month by approximately EUR 270 per year at the level of 2027.

”Sales in the commerce sector account for approximately 50 per cent of all VAT revenue in Finland. With the significant increase in the general VAT rate in 2024, consumers and consumer services have already significantly participated in tax action and the improvement of public finances,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

As the elections approach, there have been initiatives from different parties to increase consumption taxes and freeze the income limits of the income tax scale. New tax increases during the next government’s term would further weaken purchasing power. If the general VAT rate was increased to 26 per cent and the lower 13.5 per cent rate to 14 per cent, and the income limits of the state income tax scale were frozen for one year, the same wage earner’s tax-free purchasing power would decrease by approximately EUR 280 more per year. With a two-year index freeze, the loss would increase to approximately EUR 425.

In comparison, the Christmas season in 2025 increased the tax-free sales of domestic commerce by an average of EUR 135 for every Finn aged 15–85.

”New tax increases would decrease the purchasing power of middle-income earners by hundreds of euros per year. This is also a significant amount in terms of the demand in domestic commerce,” says Kurjenoja.

Employment in private services is crucial for the entire economy

Commerce and other private services employ more than half of Finland’s employees. The development of employment in these sectors is therefore crucial for the national economy and public finances as a whole.

”The growth of employment in Finland cannot be achieved without jobs created by private services. Cutting purchasing power would threaten the demand in these sectors,” says Luoto.

The calculations are based on the salary and tax bases in 2027. They assume that the net salary is used entirely for consumption. The changes in purchasing power reflect the VAT-free value of consumption. The calculations for new tax increases are example scenarios.

For further information, please contact:

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

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)40 820 5378, jaana.kurjenoja(at)kauppa.fi