The Finnish Commerce Federation is satisfied with the Government’s decision, made at its budget framework session, not to raise the rate of value added tax. However, the decisions on the whole will reduce purchasing power and increase costs incurred to commerce and the service sector.

“From the point of view of domestic consumption and the provision of employment, it was positive that VAT taxation was not tightened at the budget framework session. Consumption taxation is part of the tax wedge for Finnish work and has a direct impact on the actual purchasing power of a wage earner,” says Juhani Pekkala, Managing Director at the Finnish Commerce Federation.

However, the decisions of the budget framework session on the whole will eat away at the purchasing power of wage earners. The freezing of the state’s income tax inflation adjustments will cut take-home income, and the tightening of electricity and fuel taxation will reduce after-tax purchasing power.

Increasing the personal share of commuting expenses will, for its part, increase the rigidity of the labour market and reduce the willingness to accept jobs further away from home.

In addition to decreasing the purchasing power of consumers’ net salary, the tightening of electricity and fuel taxation will burden the cost structure of commerce. The heavier the cost structure of commerce, the more operational efficiency improvements and personnel-related cost reductions, for instance, are required.

“Instead of tampering with purchasing power, the Government could have renewed the business subsidy system in a more ambitious manner,” says Pekkala.

For further information, please contact:
Juhani Pekkala, Managing Director, juhani.pekkala(at), tel. +358 (0)9 1728 5111, +358 (0)400 419 560

Jaana Kurjenoja, Chief Economist, jaana.kurjenoja(at), tel. +358 (0)9 1728 5134

The Finnish Commerce Federation represents commerce – the largest sector of economic life. Commerce employs around 300,000 persons in Finland. The Federation has around 7,000 member companies and represents both retail and wholesale commerce in industry politics and labour market lobbying.