VAT threshold to rise to €15,000 — what else does Budget 2021 have in store for entrepreneurs?
“This is a step in the right direction and we support it. It is also important that the sliding VAT relief scheme is being retained,” Pentikäinen says.
Last year, Suomen Yrittäjät proposed raising the VAT threshold from €10,000 to €20,000 and extending the upper limit for the VAT relief scheme from €30,000 to €50,000.
The annual effect of the rise in the VAT threshold is estimated at €20 million.
Suomen Yrittäjät asked over 1,000 entrepreneurs what they thought about raising the VAT threshold in its Yrittäjägallup survey in January 2019. A quarter of respondents (25%) supported raising the threshold to €20,000, while 19% supported raising it to €30,000.
Twenty-two per cent of respondents supported raising the threshold to €40,000. Finally, 19% were satisfied with the current €10,000 threshold.
Electricity tax to be reduced
Another important change for entrepreneurs is the planned reduction in electricity tax rates to the EU minimum.
Mika Kuismanen, Vice President Economics and Chief Economist at Suomen Yrittäjät, says, “Reducing the electricity tax is an important step. Alongside that, the electricity tax rebate scheme is being scrapped. This was a scheme that only benefited a few businesses with high energy consumption.”
The change is estimated to benefit entrepreneurs by €245 million annually.
The proposal for Budget 2021 contains other items which will affect entrepreneurs. Many entrepreneurs will be negatively affected by the increase in fuel prices caused by cuts to business subsidies, such as the scrapping of the tax support for paraffinic diesel. According to the proposal for Budget 2021, this is expected to have an effect of €21 million next year. The effect of the tax increases for work machines and heating fuels will be €104 million.
Positive changes for entrepreneurs include the continuation of double declining balance depreciation. Double declining balance depreciation of movable capital assets is temporarily possible from 2020 to 2023. This facility will reduce tax yields next year by €24 million.
The value of the tax relief on unlisted limited liability companies’ employee share schemes is around €4 million.
Public finances must be rationalized
The Minister of Finance, Matti Vanhanen (Centre), published the proposal for next year’s budget on Wednesday. The total size of the budget is €61.6 billion, at a deficit of €7 billion.
Kuismanen says, “The state of public finances is worrying. We’re playing a kind of chicken here and running up a deficit. The deficit in this year’s budget is estimated at €19 billion, and €7 billion for next year. That’s a big gap to bridge. After the coronavirus crisis, we’ll have to start intently rationalizing the public sector,” Kuismanen says.