Finland investigates “Social VAT” increase to cut labour taxes

23 February 2012

Update: Finland is to raise VAT 1% in 2013

Finland is again looking at a rise in the standard rate of Value Added Tax.  The OECD has recommended that it consider a reduction in its employer tax rates, which could be funded by a VAT rise.

Whilst Finland enjoys low sovereign debt levels and a small deficit, particularly in comparison to other EU countries, its rapidly ageing population means that it will need to raise a further 4% in annual GDP to fund the cost of care and retirement charges.

The OECD is pushing Finland to increase the incentives to retain the best talent in the country, and so prop up future tax take.  Measures would include a cut in employer and employee levies and taxes.  This could be funded by a rise in the current Finish 23% VAT rate.  This rate was last increased in July 2010, and is already one of the highest EU VAT rates.

An alternative would be the elimination of many of the reduced VAT rates.

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