Government Agreement on Taxes

The government has reached agreement on fuel tax increases at budget talks held on Thursday. VAT on food will be cut to 12 percent from the current rate of 17 percent in October, 2009. Tax on gasoline will be increased by 3.94 dents per litre with diesel fuel going up by 4.46 cents per litre. Domestic electricity tax will also increase by 0.14 cents per kilowatt hour. The average annual fuel bill is expected to rise by about 50 euros as a result. VAT on food will be cut to 12 percent from the current rate of 17 percent in October, 2008. The threshold on inheritance tax will be raised to 20,000 euros from the beginning of next year. Taxation on alcohol beverages is also to increase. The tax on spirits will go up by 15 percent. The price of a bottle of grade 3 middle beer will increase by five cents, wines by about 20 cents. The income tax burden will be lightened next year by 330 million euros as a result of changes to local government taxation allowances. Wage and salary earners will take home from just under 100 euros to 300 euros more annually. A further possible cut in income tax will only be examined half-way through the current electoral period. Prime Minister Matti Vanhanen said any cut in income tax was linked to moderation in pay rises. YLE