The government's plans to raise Finland's general rate of value added tax (VAT) to 25.5 percent will have a disproportionately negative impact on lower-income earners.
This is the view of Tuomas Parikka, chief actuary at Statistics Finland, as explained in a blog post (in Finnish) which compared the potential effect on different income level groups.
"The key conclusion is that an increase in the general value added tax rate would further exacerbate the gap between high and low income earners," Parikka wrote.
Finance Minister Riikka Purra (Finns) announced the VAT hike at a press conference earlier this week, as Finland's right-wing government looks to achieve about 9 billion euros worth of spending cuts and tax rises during its term in office.
According to Parika's calculations, the increase means people on lower incomes will spend 0.71 percentage points more of their income on VAT than previously.
Conversely, higher-income earners will experience a much smaller impact from the rise in the VAT rate, or about 0.41 percentage points.
All Points North assesses the government's latest round of austerity measures and asks what the spending cuts and tax rises might mean for you. Listen to the episode via this embedded player, on Yle Areena, via Apple, Spotify or wherever you get your podcasts.
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