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Options for Reforming the Finnish Tax System

Listed author(s):
  • Isabelle Joumard
  • Wim Suyker

This paper reviews the Finnish tax system and the scope for further tax reform. Finland is among the most egalitarian countries in the OECD and a high tax burden is required to finance the associated public spending. Nevertheless, capital and corporate income taxation was substantially and effectively reformed in the early 1990s, through significant rate cuts cum base broadening measures. But, despite income tax cuts since the mid-1990s, high taxes, especially on labour income, still hamper growth potential and distort economic behaviour. In this respect, the poor performance of the Finnish labour market is revealing. Tax reforms have a major role to play in improving the long-term performance of the Finnish economy. Though the scope is limited, the tax burden should be shifted as much as possible from labour to property and consumption, while the earned-income tax allowance should play a smaller role, enabling cuts in statutory rates. Redesigning social security contributions to ... Options pour la réforme du système fiscal finlandais Cette étude examine le système fiscal finlandais et propose une série de nouvelles réformes dans ce domaine. L’équité est une des préoccupations majeures en Finlande. Cela se traduit par des dépenses publiques élevées, et des prélèvements fiscaux en conséquence. Néanmoins, l’imposition du capital et des bénéfices des sociétés a fait l’objet d’une réforme ambitieuse au début des années 90, avec des resultants satisfaisants. Les taux d’imposition ont nettement été réduits, alors que les régimes favorables ont été pour la plupart éliminés. Sur le marché du travail en revanche, la fiscalité continue d’engendrer des distorsions et de peser sensiblement sur le potentiel de croissance de l’économie, malgré les réductions de l’impôt sur le revenu survenues depuis la seconde moitié des années 90. A cet égard, les résultats médiocres obtenus sur le marché finlandais du travail sont révélateurs. Les réformes fiscales ont un rôle majeur à jouer dans l’amélioration des performances à long ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 319.

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Date of creation: 07 Feb 2002
Handle: RePEc:oec:ecoaaa:319-en
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