The four-party coalition has agreed a package of tax changes and spending cuts that will establish the frame within which state budgets are planned between 2026 and 2029.
According to Finance Minister Riikka Purra (Finns), tax cuts account for some 1.25 billion euros in the package, which was announced late on Wednesday after negotiations between the government parties.
While tax cuts are to benefit high earners the most, spending reductions will affect development aid, municipal spending and higher education, among other areas.
We have summarised a list of the most important changes announced on Wednesday.
1. Income taxes reduced
- The government is reducing income tax revenue by around a billion euros.
- In 2026 low- and middle-income earners' total taxation will reduce by 525 million euros, and in 2027 the total will be 650 million euros lower.
- The higher rate of Employment Income Credit for parents of children under 18 will be increased, at a cost to the state of 100 million euros.
- The marginal tax rate incurred by those earning more than 100,000 euros — that is, the percentage paid in tax for each additional euro they earn — will be reduced to 52 percent.
2. Corporate taxes reduced
- Corporate taxes will be reduced to 18 percent in 2027. At present the corporate income tax rate is 20 percent.
- The government says its goal is to encourage entrepreneurship.
- The tax cut will cost the state some 830 million euros.
3. VAT on food reduced, increased taxes on nicotine pouches and sugary drinks
- The VAT levied on food will be reduced by half a percentage point from the current 14 percent. That will cost state coffers some 145 million euros.
- Taxes on sugary drinks will be increased to bring in an extra 50 million euros in revenue.
- Nicotine pouches and vapes will see taxation increased to bring in some 30 million euros per year.
4. State administration and municipalities cut, ministers' pay reduced
- The government will aim to save some 130 million euros in administration costs.
- Municipal funding will be reduced by some 75 million euros.
- Ministers' pay will be cut by five percent from 2026.
5. Trade union membership fees no longer tax-deductible
- Workers won't be able to claim a tax deduction for trade union membership fees.
- The same dedication right will be cancelled for companies' membership fees in employer federations.
6. Development aid cut
- International development aid funding will be cut by some 50 million euros.
- Support for humanitarian aid for Ukraine will increase by some 10 million euros.
7. Education measures
- Higher education funding will be cut by 30 million euros in 2026, by 20 million in 2027 and 15 million from 2028.
- The government will spend some 100 million euros on increasing the number of places on university courses.
- There will be increased funding for teaching Finnish and Swedish as a second language for those children whose first language is neither.
- Students from outside the EU and EEA will have to pay tuition fees for vocational and upper secondary (high school) education.
8. These decisions were also made:
- Defence spending will increase to three percent of GDP by 2029. That will mean around 3.6 billion euros of additional defence spending.
- The threshold for paying inheritance tax will increase to 30,000 euros, up from the current 20,000 euros.
- Mining taxes will be increased.
- Funding for carers' benefits will increase, and end-of-life care will be expanded.
- There will be five million euros of extra funding to support children's hobbies.
- Fees for schools' afternoon and breakfast clubs will increase, to bring in some seven million euros in additional revenue.
- The government is cancelling its controversial plan to make the first day of sick leave unpaid.
