The Petteri Orpo (NCP) government on Tuesday decided on a range of measures to cut spending and increase revenue for the state to try and reduce the need for new debt.
The whole package is worth around three billion euros. The cuts and spending increases are happening because tax revenues are insufficient to cover expeditures, and Finland is at risk of action from the EU for breaching the Growth and Stability Pact.
This year the state is taking an additional 14.4 billion euros in debt. Finnish state debt is around the average among EU countries, but above average for the Nordics.
This article includes the main points announced on Tuesday.
1. VAT increase raises the cost of goods and services
- The government decided to increase the VAT rate on goods and services from 24 percent to 25.5 percent. The increase comes into force before the end of the year.
- The 1.5 percentage point increase raises the cost of goods and services. This includes things like petrol, hairdressers' services and clothes, if the merchant decides to pass the full cost on to the consumer.
- The increase is estimated to be worth around a billion euros to the state coffers. It does not apply to food, which will still be taxed at 14 percent (with the exception of sweets, which incur the full rate), and bus tickets, which are taxed at 10 percent.
2. High-earners face bigger taxes
- Taxes on larger pensions will increase. They affect those receiving between 23,000 and 57,000 euros per year in pensions.
- The highest two income deciles will not see their tax rates indexed to rising earnings this year, thereby increasing their tax rates. This applies to pensioners and wage-earners making at least 88,200 euros.
- There will be a 100 million euro cut in the tax allowance for household expenses.
- Taxes on low and middle income earners will see taxes ease slightly.
3. Savings in healthcare
- The ratio of staff to patients in round-the-clock care settings will reduce to six staff for every ten patients.
- The public treatment guarantee will worsen: basic healthcare services must be available within three months, while dental care will have to be provided after six months of waiting.
- Healthcare charges will be expected to raise an extra 100 million euros. The increased charges will be focused on specialist care.
- 24-hour healthcare units and specialist healthcare units will be rationalised and reduced in number. Every healthcare region (known as "wellbeing services counties") will, however, retain at least one hospital with maternity and surgery provision.
4. Student benefits cut
- Funding for vocational education will be cut by 100 million euros. The cuts will be aimed at those who have already obtained one degree, rather than those leaving basic education.
- The right to free study materials will end in the year when students turn 18.
- Students will get their own separate, and less generous, system of housing benefit support. They had been transferred to the general housing benefit system in 2017.
5. Sweets and hard liquor getting dearer
- Sweets and chocolate will be taxed at higher rates. The current VAT rate is 14 percent, but that will increase to 25.5 percent.
- Tobacco taxes will increase.
- The tax on sugary drinks will rise.
- The price of stronger alcoholic drinks will rise as taxes on them increase. The government has previously reduced taxes on beer.
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