Finland Proposes Major Social Tax Changes in 2017 Budget

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By Jared Mondschein

Sept. 22—A proposed 2017 budget that would decrease employer social tax contributions, increase most employee social tax contributions and provide small individual income tax breaks was submitted to parliament Sept. 15 by the Finnish cabinet.

The budget, expected to take effect Jan. 1, 2017, formally proposes many of the items contained in the draft 2017 budget issued Aug. 12, 2015.

Proposed Decreases in Employer Contributions

Under the proposed budget, employer social security contributions would decrease to 1.06 percent of salaries and wages from 2.12 percent.

Employer unemployment insurance contributions would decrease for the small businesses to 0.8 percent from 1 percent. For larger business, or those with payroll amounts greater than 2,044,500 euros ($2.29 million) a year, the employer contribution rate would decrease to 3.3 percent form 3.9 percent.

Employer pension fund contributions would decrease to 17.95 percent from 18.1 percent.

Proposed Increases in Employee Contributions

The employee health insurance contributions would decrease to 0.06 percent of salaries and wages from 1.3 percent in the proposed budget but other social tax rates would increase under the proposed legislation.

The daily allowance would increase to 1.54 percent from 0.82 percent while the pension contributions would increase to 6.15 percent from 5.7 percent and unemployment insurance would increase to 1.6 percent from 1.15 percent.

Proposed Income Tax Breaks

The proposed budget would increase all income tax bracket thresholds by a small amount while decreasing both the highest and lowest income tax brackets by 0.25 percentage points.

Under the proposed income tax changes:

•The first income tax bracket's threshold would increase to 16,900 euros ($18,970) from 16,700 euros ($18,746) while the rate would decrease to 6.25 percent from 6.5 percent.

• The second income tax bracket's threshold would increase to 25,300 euros ($28,400) from 25,000 euros ($28,062) while maintaining a 17.5 percent tax rate.

• The third income tax bracket's threshold would increase to 41,200 euros ($46,247) from 40,800 euros ($45,798) while maintaining a 21.5 percent tax rate.

• The fourth and highest income tax bracket's threshold would increase to 73,100 euros ($82,055) from 72,300 euros ($81,157) while the rate would decrease to 31.5 percent form 31.75 percent.

Now subject to parliamentary approval, a Finnish Finance Ministry official told Bloomberg BNA that it “is highly likely that the proposed amendments are adopted by mid-December and then submitted to the president for ratification.”

To contact the reporter on this story: Jared Mondschein at

To contact the editor responsible for this story: Michael Trimarchi at

For More Information

The budget documents are available in Finnish at

More information on payroll issues in Finland can be found in the Finland country primer.

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