On Monday Yle reported that between 2006 and 2009, Social Affairs and health Minister Laura Räty had taken advantage of complex corporate arrangements that allowed doctors to declare part of their income as tax-free dividends, thereby allowing them to essentially benefit from lighter taxation on their earnings.
In February 2006 Räty became a shareholder in the company DocOne. The company’s operations model allowed the then-doctor to treat the additional income she earned -- at her private practice at Töölö’s Mehiläinen private health care company -- as fringe benefits and dividends instead of a taxable salary.
At the end of 2006 Räty established the investment company Groundhog Holding Ltd. This company then became a shareholder in DocOne. But Räty’s additional income was relatively small. Between 2007 and 2011, she earned some 20,000 euros in tax-free dividends from DocOne and its successor Terveyden tuottajat Oy.
However had she declared this income as a salary in addition to her earnings from the Helsinki-Uusimaa hospital district HUS, she would have paid more than half of it in taxes and other mandatory contributions. Räty worked at HUS’ Hyvinkää hospital between 2007 and 2011.
"I wouldn't do it again"
While the practice was not illegal at the time, it sparked debate about the ethics of declaring taxable earned income as tax-free dividend income, with the opposition Finns and Centre parties declaring the minister's past actions immoral.
In a statement issued later Monday Räty said she wouldn’t engage in a similar practice today.
“Now there has been a public debate about how doctors manage their work through companies and whether or not it’s acceptable and would I do the same thing today, and I certainly wouldn’t,” she declared.
Räty said that she had to consider abandoning the practice as well as her part-ownership in the private sector health services provider Attendo in 2011, when she was elected deputy mayor of the city of Helsinki.
“I had to consider how I would continue my career as a doctor and if I did, how it could technically be organised,” she said
“At the time I came to the conclusion that I couldn’t have any ties to the care sector or medical business,” she added.
Räty conceded that the world and legislation had changed “quite a lot” since 2006, adding that it was no longer appropriate to combine corporate arrangements with official duties.
“In principle I have given up this practice precisely because of its related problems,” she remarked.
Räty regrets statements about low income earners
Last weekend Räty was also under the scrutiny for statements she made about low income earners. In an interview with the web paper Verkkouutiset, Räty said she doubted that many Finns could be earning less than 2,100 euros monthly.
In fact there are slightly over 300,000 families within that income bracket in Finland.
She later said that she had “chosen her words very poorly” during the interview. She expressed regret for offending Finnish parents with children.
“It was not my intention. I can’t explain my poor choice of words,” she added.
“However the matter is very important. Child allowance cuts will hurt all families with children. In the model we are now considering compensation would only apply to one-third of those who will be affected by this cut. I think that’s not fair. I believe that all low- and middle-income earners should be eligible for the child (tax) deduction,” the minister commented.
Räty said in her statement Monday that she would strive to be open and honest in declaring her ties. She said that she had also offered apologies to Prime Minister Alexander Stubb over the comments made in the Verkkouutiset interview.
