Speaking at a seminar held by the Taxpayers’ Association, Finance minister Alexander Stubb on Tuesday outlined his view of the tax cuts unions expect as a quid pro quo for Finland’s long-awaited competitiveness pact, which cuts the cost of labour.
In short, Stubb says the government needs an improved economy before it can agree to cutting taxes. No tax cuts are on the horizon in the budget talks set for April 5.
"In these budget talks we can’t do it, otherwise we’d push the budget and deficit so far that our debt ratings would fall even further and we’d quite probably be forced into an EU Commission budget supervision mechanism," said Stubb.
In June the government will look again at the economy, and could plan tax cuts—a crucial precondition for the service sector union PAM to participate in the competitiveness pact. The pact reduces workers’ income by 2-3 percent, so tax cuts to cushion the blow are regarded as crucial by the service sector union. Some 80 percent of PAM’s 230,000 members are women and many of them are in low-paying jobs.
"No regional taxes"
Getting the union on board is a key objective for the government. Prime Minister Juha Sipilä will attend the union’s board meeting on Thursday, but the wrangling looks difficult to resolve: the union does not want to commit to reducing member incomes without tax cuts, and the government says it can’t confirm the tax cuts until as many unions as possible have agreed to the deal and the economic indicators look healthier.
During the seminar Stubb also weighed in on the idea of regional governments getting the power to raise taxes. Finland is set to bring in 18 regional governments as part of a reform of health and social care. The authorities themselves are a long-standing Centre Party objective, and they would be stronger with their own ear-marked funding, but Stubb’s NCP is staunchly opposed to any additional taxes.
Stubb told attendees that regional governments with the power to levy taxes would create pressure for more taxes on work and make the taxation system even more complicated than it already is.
