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TAX NEWS - June 2010

Finnish Tax: Finnish finmin group proposes lower corporate tax

HELSINKI, June 21 (Reuters) - Finland should cut its corporate taxto spur growth in coming years as the population ages, with the shortfall to be partly covered by a higher value added tax, a Finance Ministry working group said.

The group, led by the ministry's permanent under-secretary, Martti Hetemaki, said on Monday the corporate tax should be cut to 22 percent from the current 26 percent.

It estimated lost revenues from proposed changes, part of a broader proposal for the Nordic country to shift its focus more towards consumption taxes from labour taxes, at around 2 billion euros ($2.48 billion).

Some 1.4 billion of this could be made back through raising the value added tax by some two percentage points across the board, it said, with the remainder to be collected through raising as yet unspecified taxes.

"While preparing the report the working group has taken into account that the ageing of the population will affect in the future the taxation of labour, especially in municipal taxes and corporate pension payments," the group said in statement.

A final version of the report will be submitted later in 2010, but no tax reform is expected in the near future.

Finance Minister Jyrki Katainen said at the weekend no tax reforms would be done before parliamentary elections due in April 2011.

The Finance Ministry has warned that Finland will face a growing budget gap in coming years as its population ages and leaves the workforce, and it must find ways to extend working life, for example through raising the retirement age.
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