According to Prime Minister Petteri Orpo (NCP), increasing the general value-added tax (VAT) will be a key tool for balancing state finances when the government holds budget negotiations next week. However he told the tabloid Ilta-Sanomat on Saturday that that the VAT on food will not be raised.
The general value-added tax rate in Finland is 24 percent. Groceries, restaurant and catering services are subject to a reduced VAT rate of 14 percent.
Meanwhile, an even lower rate of 10 percent applies to some products and services including medicines, public transport, accommodation services, as well as sports services, books, cinema tickets and other entrance fees for cultural and entertainment events, as well as television and broadcasting activities.
According to Orpo, increasing the general value added tax is a good tool, because even a small increase can raise a lot of money for the state coffers.
VAT is a consumption tax that consumers and companies pay on almost all goods and services. As it is not a progressive tax, any increase is proportionally felt more by those with lower incomes.
Higher taxes on books, medicine and transport tickets
Members of the right-wing cabinet are to begin hammering out the General Government Fiscal Plan on Monday. They aim to make three billion euros’ worth of additional adjustments in state finances in an effort to reduce the national debt.
Orpo did not specify how much the general VAT will be increased.
According to the government programme published last summer, "commodities included in the current reduced 10 percent VAT rate will be moved to 14 percent, with the exception of newspapers and magazines."
That would significantly affect medicines and mass transit as well as the sports and cultural sectors.
"That increase will boost tax revenues by 700 million euros. It's an efficient way to get a lot done," Orpo told Ilta-Sanomat.
Finance Minister Riikka Purra (Finns) has said several times that the VAT on food might be raised, most recently a month ago. When asked about the issue by commercial broadcaster MTV on Friday, she declined to comment.
A poll published on Friday suggested that the vast majority of people in Finland opposed any rise in VAT on food.
Ministries keep budget proposals secret
Each ministry is to present its proposals for spending cuts at the framework negotiations. This information is generally made public in advance, but this time the two ministries with the largest budgets have kept their proposals secret.
The Finnish news agency STT asked the Ministry of Finance and the Ministry of Social Affairs and Health for documents submitted ahead of the government's austerity decisions.
The ministries have refused to hand them over, saying that the documents will only be made public after the government makes a decision on the matter.
Tomi Voutilainen, a professor of public law at the University of Eastern Finland, told STT that he sees the decision as problematic. According to him, there is no legal basis for withholding the information.
Minister of Social Affairs and Health Kaisa Juuso and Finance Minister Purra both represent the nationalist Finns Party.
Last August, the chair of the Council for Mass Media in Finland expressed concern over what he referred to as "exceptional" criticism of the media by Finns Party politicians.
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