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TAX NEWS - June 2010

Finland Tax: Coalition parties told they will not enact tax increases

The government of Mari Kiviniemi, which starts work on Tuesday does not plan to enact massive changes in taxation.

In Saturday's mini-government talks, the parties in the coalition said that they will not enact tax increases, and that the main aim is to follow in the footsteps of the government of Prime Minister Matti Vanhanen (Centre).
Tax increases set by the Vanhanen government will be adhered to, and slight changes are to be made in energy taxation. Kiviniemi says that their details will be made public later.

The government talks came in connection with the small reshuffle precipitated by Kiviniemi's rise to the leadership of the Centre Party, to replace Vanhanen who recently resigned as the Centre Party leader and Prime Minister.

The government programme drawn up was not very detailed, and Kiviniemi preferred to call it a "statement of key policy lines", rather than a full-fledged new programme.
Minister of Finance Jyrki Katainen (Nat. Coalition Party) said that the reasons for Saturday's decisions included the European economic crisis and the prevailing instability in the banking sector.

Katainen reiterated on Thursday that major tax reform could have unforseen consequences on the Finnish economy, although it would have been a politically expedient decision.

"Now we had to choose between the stability of the Finnish economy and political 'busyness'", Katainen said.
The jocular comment on political action for action's sake was a jab at the opposition. On Friday, Social Democratic Party vice chair Miapetra Kumpula-Natri had called for early Parliamentary elections.

On Saturday, Kumpula-Natri was not demanding new elections any more, but she was nevertheless critical about how the government has been handling unemployment.

"Finland cannot afford to wait for eight months", Kumpula-Natri said.
The four government parties aim at promoting economic growth, equality, and social cohesion. Promoting growth is a considerable challenge, as this year's deficit in public finances is expected to fall below the European Union's three per cent stability threshold.

The aim is to reduce the deficit next hear to well below the three per cent limit
Undersecretary of State Martti Hetemäki of the Ministry of Finance sees the aim of slashing the deficit as the most important aim of the new government programme, as it would increase confidence in the Finnish economy.

"The message of the government programme is a credible one, as there will be no new policies brought in with it that add spending or reduce tax revenue", Hetemäki said on Saturday.
Director Jaakko Kiander of the Labour Institute of Economic Policy called the policy a sensible one.

"It is a kind of wait-and-see situation. No completely new policy can emerge in just a couple of days.
Also praising the announcements was Jussi Mustonen, the director responsible for economic policy matters at the Confederation of Finnish Industry (EK).

"Moves to promote growth in corporate taxation, for instance, would have been welcome, but this was no disappointment considering what realistic expectations there were", Mustonen said.

The decisions on taxation were also welcomed by Jussi Järventaus, managing director of the Federation of Finnish Enterprises.
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