Opposition rejects corporate tax cut and urges government to reconsider

The Finnish opposition has criticised the government’s planned corporate tax cut, saying it will not deliver sufficient growth to justify its cost. The comments were made on Yle’s morning programme as MPs assessed Finance Minister Riikka Purra’s budget proposal for next year, presented on Tuesday.

Markus Lohi of the Centre Party, chair of Parliament’s Finance Committee, said the proposal lacked the bold measures that Purra had sometimes put forward previously.

“It now seems there were no surprises and that the courage was missing,” Lohi said.

Finland should comply with the European Union rule on the so-called net expenditure path, Lohi said. In his view, this would have required further fiscal adjustment measures, but those were not made, increasing pressure on the next government.

Pauli Aalto-Setälä of the National Coalition Party, deputy chair of Parliament’s Economic Affairs Committee, took a more positive view of the economic outlook and pointed to planned savings of 4.8 billion euros next year.

“I would not be quite as gloomy,” Aalto-Setälä said.

Opposition criticises corporate tax cut

The government plans to reduce the corporate income tax rate from 20 percent to 18 percent at the beginning of next year. The measure is intended to boost economic growth and encourage companies to invest.

Saara Hyrkkö of the Greens, deputy chair of the Finance Committee, said it was difficult to understand the decision while public deficits were at record levels.

“Finns are wondering why the government is still pushing ahead with, for example, a corporate tax cut that experts have also deemed ineffective, even though the deficits are at record levels,” Hyrkkö said. She put the cost of the tax cut at more than 18 million euros.

Lohi said the government should be cautious about large tax cuts.

“Now would have been the last moment to come to its senses over the corporate tax cut, which even the government’s own proposal does not describe as a growth measure. From the perspective of public finances, it will not pay for even half of itself,” he said.

Aalto-Setälä defended the government’s tax decisions, saying unpredictable tax policy was the worst thing for companies. He said economic growth had often resulted specifically from economic decisions related to taxation.

Concerns over low-income households

The opposition said the government’s familiar political priorities were visible in the budget proposal. Hyrkkö and Lohi expressed particular concern about low-income people and child poverty, saying the government had not done enough to address them.

Hyrkkö also criticised the proposal for failing to address environmental crises. She said there was a shared understanding of the security threats facing Finland in traditional defence policy, but not of the effects of environmental crises.

Despite their disagreements, the MPs agreed that economic growth was good news and that Finland needed a shared vision for the future.

Aalto-Setälä said discussions about the country’s future should involve people beyond economic experts and parliamentary committees. Hyrkkö said it was important to repair divisions between people.

“What matters most now is to restore Finns’ faith in the future. We lack a shared story about Finland in the 2030s, and building it is also the task of politicians,” Lohi said.