The Taxes and the Subsidies for You

At present, more than 180 tax subsidies have been identified. About one third of the subsidies cannot be estimated in euros, and only a magnitude estimate can be provided for some. In 2018, the total amount of tax subsidies is estimated at approximately 26.8 billion, of which 17.5 billion will be allocated to state tax revenue. In addition to the objectives of equalizing fiscal and income disparities, some tax regulations also aim to guide behavior through tax cuts or sanctions. When regulating tax changes, it is important that assessments of the effects of the changes are as up-to-date, comprehensive and sufficiently accurate as possible. The audit assessed whether the impact assessments on tax changes and subsidies were carried out as accurately and comprehensively as possible.

The preparation of impact assessments for tax changes is based on a good knowledge base

Based on the audit, impact assessments of tax changes provide a good basis for decision-making. Extensive information and several calculation models are available for making them. Impact assessments are carried out on a tax-by-tax basis, and practices vary somewhat between tax types. Attention should be paid to ensuring that the tax department of the Ministry of Finance has a unified view of the implications set out in the government proposal. As impact assessments are carried out on a change-by-change basis, the combined effects of several changes may be overlooked. Therefore, impact assessments should also be carried out on the combined effects of several changes. Such impact assessments could include, for example, the combined effects of one-year tax changes on the financial situation of households, employment or a specific group of taxable persons. Before filing business taxes you should know the followings:

Although the calculations are currently made with a good data base and calculation models, there is a risk that the situation will deteriorate in the future if insufficient attention is paid to the issue. There are currently three calculation models available for personal taxation, of which the most widely used TUJA model is being phased out due to a reduction in available human resources. Another key model also needs to be rebuilt due to the reform of the Tax Administration’s information system. At the same time, the scarcity of human resources threatens to degrade the quality of the calculations. Building a deputy system could reduce this risk.

Little information is available on the effects of tax subsidies

Tax regulations that deviate from the standard tax system are considered tax aid. In Finland, the standard tax system and tax subsidies were last defined in 2009. Since then, both tax legislation and the operating environment have changed, so it should be clarified whether the definition of the norm and thus the list of tax subsidies are still up-to-date.

Tax subsidies significantly reduce tax revenues. Despite their significant impact on public finances, their costs and effects are poorly monitored and information on their effects is scarce. Only the loss of income caused by tax is calculated annually.