Ministry of Finance: VAT hike should come into effect in September

THE MINISTRY of Finance proposes in its second supplementary budget draft of the year that the general rate of the value-added tax be raised from 24.0 to 25.5 per cent on 1 September. The Finnish government decided to raise the general rate, which is

By: helsinkitimes.fi

May 07 2024
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Ministry of Finance: VAT hike

THE MINISTRY of Finance proposes in its second supplementary budget draft of the year that the general rate of the value-added tax be raised from 24.0 to 25.5 per cent on 1 September.

The Finnish government decided to raise the general rate, which is levied on products and services such as cars, clothing and petrol, in its framework session roughly a month ago without specifying when the raise would come into effect.

The decision does not affect the lowered value-added tax rates of 10 and 14 per cent, which are levied on products such as food and books.

The Ministry of Finance on Monday said its supplementary budget would reduce the need to borrow by almost 300 million euros by generating 121 million euros in additional revenue and slashing budget appropriations by 177 million euros on items such as energy subsidies and immigration costs.

It also downgraded the projection for tax revenue by 221 million euros, citing the eroding economic situation. The value-added tax raise, though, is expected to increase revenue by roughly 180 million euros in 2024.

The budget draft lays out investments in transport infrastructure projects and a programme aimed at eliminating long-term homelessness. The funding for transport infrastructure is spread across a number of relatively small projects, including improving national road 5 between Leppävirta and Kuopio.

The Ministry of Finance argued that the fiscal adjustments are necessary because the deficit in the public economy is on track to creep up to 3.5 per cent of gross domestic product in 2024, a level that could trigger the excessive deficit procedure of the EU.

“We’re taking a meagre and stringent approach while reducing borrowing,” Minister of Finance Riikka Purra (PS) remarked on X on Monday.

Aleksi Teivainen – HT