SY welcomes Government’s “significant” growth measures

The Government’s proposed tax cuts encourage investments and work, while simultaneously labour-market reforms and an overhaul of the Public Procurement Act to increase competition are under way. That is the view of Suomen Yrittäjät, the Finnish SME association, of the results of the Government’s mid-term policy review.

“The Government’s action on growth is significant. The growth package is quite balanced. Cuts to corporation tax and income tax support growth, Suomen Yrittäjät CEO Mikael Pentikäinen comments on the decisions of the Orpo’s Government’s mid-term policy review.

“Of particular importance are the reduction to the highest marginal tax rates and fact that dividend tax is not being raised. The reduction in marginal tax rates motivates people to do more work, and the level of dividend tax encourages risk taking,” Pentikäinen says.

“In income tax, the decision to reduce the highest marginal rates is one of the growth measures that business owners support the strongest. Economics research also presents a strong case for the long-term positive growth impacts of the reduction,” says Petri Malinen, an economist at Suomen Yrittäjät.

Malinen says that the decision to reduce corporation tax to 18% will also accelerate growth.

“The cut in corporation tax will support the growth of almost every Finnish limited company. Extending the right to offset losses to 25 years is an important growth measure, as growth happens in growth companies, which have fewer opportunities to benefit from reduced corporation tax, because rapidly growing companies don’t necessarily make profits,” Malinen says.

“YEL policy problematic”

Regarding the recently launched exploration on reforming YEL, or entrepreneurial pensions, the Government resolved that business owners’ pension contributions would in future be more clearly determined “in accordance with actual incomes”.

“This could prove a very problematic policy, as a business owner’s actual income is very difficult to determine in different business forms. They should have waited for the report to come out instead of rushing, because this is a very serious matter. The change must be drafted carefully,” Pentikäinen says.

“What would be important for business owners, however, is a series of repairs to the Entrepreneur’s Pension Act, in which a transitional provision and a YEL contribution increase cap would also apply to entrepreneurial pension policies taken out after 2023. This would prevent thousands of business owners from unreasonable hikes in 2026. Combination insurance is also welcomed and something SY has long lobbied for.”

The Government said it was no longer making employees’ first sick leave day unpaid.

“This would be an important labour-market reform. When it is scrapped, the qualifying period for sickness allowance should be shortened, thus reducing the costs to employers of sick leave and the risks of hiring,” Pentikäinen says.

Takeaways from the mid-term policy review

Income tax reduced by €1.1 billion; highest marginal income tax rates reduced to 52%.
Corporation tax rate reduced from 20% to 18% as of 2027.
When rapporteur Jukka Rantala’s delivers his report on the YEL system, changes to the system will be prepared to ensure business owners’ YEL payments are determined more clearly than at present in accordance with actual incomes. In addition, business owners who started their business in 2023–2025 will benefit from the same €4,000 increase cap as other business owners when their YEL incomes are reviewed in 2026–2028.

VAT will be reduced by cutting the 14% VAT rate on commodities to 13.5% as of 2026. Items such as food and medicine fall under the reduced VAT rate.
Part-time self-employed people’s social security will be improved by introducing combination insurance. The income security of people who are both self-employed and salaried employees will be strengthened.
Minimization of dividend taxation through share swap schemes will be prevented.
Business subsidies will be reduced by €12 million.
The right to offset losses will be extended from 2026 losses onwards.
Trade-union subscriptions will no longer be deductible against taxation as of 2026. The change will apply to both employee and employer associations’ membership fees.

Are you a Suomen Yrittäjät member yet? Read more about member benefits and advantages!