Finland's leading business lobby, the Confederation of Finnish Industries (EK), has unveiled a bold 3.5 billion euro tax cut proposal it said could jumpstart the country's sluggish economy.
In a report published on Wednesday, the group presented three tax cut proposals as well as a suggestion to simplify taxation. It declared that Finland needs a 'tax reform of the century' to spur economic growth.
EK proposed reducing the corporate tax rate to 15 percent, aligning with the global minimum. Currently, Finland's corporate tax on profits stands at 20 percent.
The report estimates that reducing corporate taxes could generate a one-time economic growth boost of up to four percent.
EK also wants to completely abolish the widely-debated inheritance and gift tax, as well as reduce taxation for the country's highest earners.
With these tax cuts and other proposals, EK suggested that economic growth would increase by an additional percentage point beyond current forecasts.
According to the lobby's calculations, the tax cuts would ultimately lead to higher tax revenues. This would mean an additional 1.2 billion euros per year for the state treasury. Over 10 years, tax revenue growth would accumulate to as much as 66 billion euros, the group noted.
"Our proposal aims to build growth on top of growth," EK Chair Aaro Cantell said.
In a recent interview with business weekly Talouselämä, Minister of Finance Riikka Purra (Finns) said the government plans to discuss tax cuts in April, adding that EK's proposed tax reductions will also be on the table.
Reducing tax manoeuvres
One proposal in the report suggests simplifying dividend taxation, which EK suggested would result in a slight, immediate increase in tax revenue.
Business owners receive part or all of their income from dividends paid by their companies. Dividends from non-listed companies have been eligible for a tax reduction based on the wealth accumulated within the company. This has encouraged business owners to receive their income as dividends rather than salary, through so-called holding companies.
Both large family-owned businesses and many well-known social media influencers have used this strategy. Former prime minister Sanna Marin benefited from the reduced tax rate in this manner, for example.
Under the lobby's proposal, one-third of dividends would be tax-free, and the remaining two-thirds would be taxed, regardless of the company's holdings. This would likely reduce the incentive for business owners to seek tax loopholes, it said.
According to EK's estimates, the reform would immediately generate an additional 81 million euros in tax revenue, aside from the 3.5 billion euros in proposed tax cuts.
Tax breaks for skilled workers
In addition to tax changes, EK also said Finland needs more immigrants.
The lobby group urged future Finnish governments to commit to bringing in 45,000 skilled individuals annually, saying such a move would boost the country's economic growth forecasts.
To attract skilled workers, the confederation has proposed a tax break. One of the incentives would be allowing a quarter of their income to be tax-free, according to the report.
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