Finnish News Recap, April (first half): Value Added Tax Edition

TAX HIKES: While austerity and cutting the budget have been the main themes for this government, thus far, it has refrained from increasing taxes significantly. No-nos have included tax cuts on high earners, entrepreneurs, pensioners, or drivers, the last of which was a very notable target for the Finns Party, campaigning on “showing the door on gas price increases.” Of course, the wealthy and the entrepreneurs tend to vote for parties of the political right, while pensioners and drivers are essential constituencies for all large parties.

The government’s latest round of measures, a part of the traditional spring budget negotiations, has finally intruded on the wallets of all these categories. This appears to have been due to an effort by the smaller parties in the government, the Swedish People’s Party and Christian Democrats – insignificant by themselves but able to affect policy when joining together. A particularly notable one is a 1.5 % increase in the general VAT,  giving Finland the highest general VAT in Europe – 25.5 %. The half a percentage point might cause problems simply because the most popular accounting software is built on the assumption that the VAT percentage will always be an integer.

The lower VAT rates on food, medicine, and specific other categories stay put at 14 %, but this is still bound to have an inflationary effect on prices for various goods and services, as well as be challenging for countless small and micro enterprises that cannot simply wrap the increase up in their prices since that would lead to fewer customers. Micro entrepreneurs (I am one) were already quite affected by the latest government’s pension reform, which pushed up mandatory pension contributions from quite a few. The VAT price rise also negates the cut on gas prices the Finns Party had achieved previously through direct gas tax cuts.

Likewise, for the first time, pensions are becoming limited. Not through direct cuts but by increasing their taxes, which has the same effect, really – and even the high earners get new taxes by adjusting scales. Tax subsidies for voluntary retirement savings are also being pared down. The whole package is being considered a major betrayal by a substantial number of right-wing voters, though it remains to be seen if they’ll find a party to switch to in protest. The last election’s attempts to build libertarian(ish) parties that explicitly campaigned on a series of cuts, which could have replaced these tax hikes, went precisely nowhere.

In other cuts, health services are being limited, vocational education slashed, student housing benefits cut, and certain state employment services ended—there is little to like for anyone. What remains to be seen is how all of this will interact with the worsening economic situation since it will further reduce consumption and make people suspicious of starting new economic activity.

SCHOOL SHOOTING: As mentioned last month, just at the start of April, there was a school shooting in Vantaa, a large suburb (well, a collection of suburbs) of Helsinki. While there has been only one death (for a moment, it seemed like there would be more, but there have at least not been updated news of serious injuries turning to fatalities), of course, a lot of people have been particularly shaken by the fact that the assailant was just 12 years old. The motive is probably bullying, but the police have still not shared the full details.

Finland has a legacy of school shootings – two very notable cases happened in the mid-00s, the Jokela and Kauhajoki shootings, where a disaffected 20-something shot up their school, causing multiple deaths and leading to a lot of debate about whether the gun laws are too lax. While the Finnish gun laws are considerably tighter than in the United States, obtaining and shooting guns is much easier than in many other European countries.

Right after Kauhajoki, in 2008, the then-Interior Minister called together a working group that suggested restricting the availability of handguns, but nothing came out of these restrictions. It is not particularly likely that the current government would do so, partly because the governing parties might have gun-owning voters, but even more, since the idea that wide availability of guns has the positive side of allowing Finnish reservists to train personally for a potential war has been gaining a fair amount of cachet after 2022. And in any case, gun violence continues to remain a comparable rarity in Finland.

In other news, it seems that the significant strikes are over for now despite still no clarity on labor market reforms; a citizen’s initiative to legalize euthanasia got 50 000 signatures, sparking a new debate on this contentious subject, as most Finns support legalizing euthanasia, though doctors are far more reticent. The current government’s parties aren’t that fond of citizen’s initiatives in general. Furthermore, a strange stench troubled Helsinki, prompting many jokes. There’s been an uptick in stories on increasing religiousness among some sectors of youth, and a notable celebrity talking head has been in the news a lot about his recent conversion.

Image: “The tax bear” is a popular name for taxmen in Finland. Image created by Bing.