Legal Alert – The Budget Proposal For The Year 2013 Published
On 30 August 2012, the Finnish Government agreed on the budget proposal for the year 2013. The expenditures amount to approximately 54 billion euro which exceeds the previous regular budget by 1.6 billion euro. The budgetary deficit is approximately 7 billion euro, which is estimated to increase the overall amount of state debt to circa 96 billion euro. The Government aims to maintain the highest credit rating available. In addition to tax increases, the proposal also aims at stimulating growth by introducing some special tax incentives.
According to the budget proposal, tax revenues for the year 2013 equal approximately 40 billion euro which is roughly 2 billion euro more than the estimated amount for the year 2012; and nearly 4 billion euro more than during the year 2011. All in all, tax revenues account for 85 % of all on-budget revenue. The largest tax receipts are taxes based on turnover, nearly 18 billion euro, i.e. over 40 % of the overall tax revenue. Among all taxes based on turnover, value added tax accounts to almost 17 billion euro. The second largest sources are taxes based on income, whereby taxes on earned income and capital bring in almost 9 billion euro; corporate income taxes amount to over 3 billion euro. Different types of excise duties add up to nearly 7 billion euro – of said amount, taxes on energy total over 4 billion euro.
Generally, the proposal tightens progression in earned income taxation as index increments are abandoned for the years 2013 and 2014. The proposal also takes into account the so-called solidarity tax, which refers to temporarily adding an additional tax bracket for annual earnings exceeding 100 000 euro as well as increasing the taxation of the largest inheritances and estates. Accordingly, also the taxation of large pension incomes is increased.
Further, all valued added tax rates are increased by one percentage point. In alignment with increasing the general value added tax rates, also the insurance premium tax is increased by one percentage point. As novel and new taxes the proposal includes the bank tax and broadcasting service tax, which applies to corporates, companies and natural persons.
In addition to tax increases, the proposal also aims at stimulating growth by introducing a tax incentive for research and development and by granting the industry the rights to depreciations double the amount of normally applicable. Investments in growth companies are stimulated by implementing a tax incentive for investments made in qualifying companies whereby the investor is granted the right to deduct part of his or her investment in his or her annual taxation which would be taxed later if the investment is realized. Further and as an alternative option for the investor, the presumed acquisition cost of investments made in unlisted growth companies would be increased to 50 % of the realization value. The precise scope of said two incentives differs to some extent.
The proposal and the Government Bills related to it will be presented to the Parliament on 19 September. The final budget will be voted on and accepted in December, in the Parliaments plenary session.