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Trade union confederations critical of sizeable cut in corporate tax rate

10.4.2013 10:15

The coalition government of Prime Minister Jyrki Katainen has decided to cut the corporate tax rate from the current 24.5 per cent to 20.0 per cent. The three trade union confederations (Akava, SAK, STTK) are not happy with the decision for a number of reasons.

Helsinki (10.04.2013 – Heikki Jokinen, Juhani Artto)

First, the government plans to finance the cut partly by raising taxes for ordinary citizens. This can only have a negative impact on the purchasing power of wage and salary earners, which in turn will inevitably affect economic growth prospects.

“Competitiveness of business enterprises is naturally important for growth and employment but wage and salary earners and the entire society also urgently need measures that serve to increase purchasing power”, said Sture Fjäder, the President of Akava, in considering the government’s choices.

Secondly, the government is prepared to grant companies and company owners this tax-break without any quid pro quo…. without demanding any commitments from the corporate sector in return to invest and create employment in Finland. “Santa Claus came early to Eteläranta (the address of the powerful employer confederation EK) this year”, was the comment of SAK’s chief economist Olli Koski on the government’s decision.

Thirdly, by lowering corporate tax in an effort to be more competitive the financial basis and funding of the welfare state will be undermined.

On Monday, Mikko Mäenpää, the President of the Finnish Confederation of Professionals STTK, proposed that corporate tax rate reductions be implemented gradually extending up until 2017 instead of the proposed cut-off date 1 January 2014. This would mitigate the impact on tax incomes and slow down the growth of public debt, he argued.

STTK’s chief economist Ralf Sund warned that from past experiences of reductions in corporate tax there was not much room for optimism. Now, it is imperative for companies to demonstrate what they can do for growth, Sund stressed.

The government made its decision to cut the corporate tax rate as part of a wider package aimed at promoting economic growth and employment and slowing down any increase in public debt. Union organizations have been highly critical of the corporate tax rate cut but a major row blew up over changes to taxes on dividends (part of the capital gains tax). The proposed changes to taxes on dividends were very favourable to many wealthy entrepreneur families. Unease at this development also emerged from within the government parties and the government had to revise its decisions on the dividend tax.

Read more:

SAK: “Santa Claus came early this year”, Yle News 21.03.2013

Cabinet agrees on dividend tax revisions, Yle News 04.04.2013

"Trade Union Pro is a member organization of Finnish Confederation of Professionals STTK."