Released on Thursday, the government budget proposal for 2017 outlines plans to collect 41 million euros in extra property tax revenue, on top of the 30 million euros in added real estate taxes that were expected.
“After the public discourse on the day care fee increase, the fact that it was dropped did not come as a surprise,” says Jukka Hakola from the Association of Finnish Local and Regional Authorities, ”but an extra tax on real estate to make up for it came as a complete surprise.”
In practice, the 2017 increase will mean that both the upper and lower tax limits on permanent residency tax and the general real estate tax will go up.
Still unclear how much
“There’s still no information on the increase percentage, but in order to come up with 41 million, they would have to raise the lower tax limit on residencies by about .03 percentage points from the already agreed upon 0.2, and the general real estate tax would have to go up to .09 from .06,” said Hakola.
At present the property tax on permanent residences is at the lowest sanctioned rate or lower in 23 cities, and the tax on general real estate is at its lowest limit in 50 cities. These municipalities will be forced to increase their real estate taxes if the budget is approved by the parliament.
“Yes, these municipalities, at the very least, will have to start asking a higher real estate tax,” Hakola confirms.
There are currently 13 municipalities that keep both their residential and general real estate tax at the lowest limit. Capital city region cities like Helsinki, Espoo, Kauniainen, Vantaa, Tuusula and Kirkkonummi are among them, along with Eurajoki, Rauma and Somero.
Nasty surprise
In 2016, the real estate tax will collect 1,679 million euros for municipal coffers, and next year will earn even more. Nevertheless, some grumbling is likely to ensue.
“Municipalities don’t like being forced to raise their taxes; they want to decide these things for themselves. In the capital city area in particular, housing costs are already high and cities have tried to keep residential taxes low to curb rising housing costs,” says Hakola.
The Taxpayers Association of Finland was also blindsided by the government’s decision.
“The sum isn’t very large, but the strange and curious feature is that the increase to the lower limit falls heavily on a few municipalities in the capital city area. Espoo and Helsinki residents can await a situation they did not want and for which there is no justification, in my opinion. Cities should be able to decide their property taxes for themselves,” says the Association’s CEO Teemu Lehtinen.
All properties defined as permanent housing are included in the scope of the permanent residency real estate tax, but this does not apply to second holiday homes or cottages. Most cities in Finland tax cottages under the general real estate tax. General real estate tax is also levied on commercial buildings, production facilities, power plants, private sports halls and land deemed liable to real estate tax.