Finland’s government has come to an agreement on public spending plans through 2020, which do not include changes to the VAT rates or direct taxes. There is an increase proposed for excise taxes for fuels but no other tax increases are proposed. Finland’s VAT rates are 24%, 14% and 10% and have remained unchanged since 2013. The government’s big push is to increase the overall employment rate from 68% to 72% while reducing public spending. The gains in employment should help generate more tax revenue over the long term and reduce the deficit from €5.4 billion to €3.2 billion through 2020.
A standard rate of 24% is higher than the EU average but less than Nordic countries like Sweden, Norway and Denmark. Based on OECD data VAT provides over about 21% of Finland’s total tax revenue. Although no rate changes are proposed, Finland reduce the number of items subject to the reduced rates of 14% and 10%. Thereby increasing the overall VAT collection rate without having the change the overall VAT rate, Greece made such a change during last year to help secure a bailout. Starting in 2016, Fiji reduced its standard rate from 15% to 9% and eliminated a number of exemptions.
It is unlikely, Finland will make an dramatic changes to its tax base during this fiscal period but a way to increase revenue without changing rates could be come from increasing VAT rates on restaurants, hotels, food and transport which comprise 1/3 of Finnish household spending based on Finnish statistics.