Abolition of VAT relief to hit small businesses

Suomen Yrittäjät is happy that the taxation of businesses and their owners will not, for the most part, be increased, according to the government programme. However, small business owners are very concerned about the abolition of VAT relief.

“The change makes smaller businesses’ operations more difficult, removes incentives to growth and raises the threshold to start operating a business or running one part-time,” Juhana Brotherus, Vice President and Chief Economist at Suomen Yrittäjät, the Finnish SME association, says.

The VAT relief scheme has been a subsidy for small businesses who are on the VAT register and whose turnover over 12 months is below €30,000. The relief scheme will be abolished from 2025 following an EU directive. The Government will not raise the small-scale business threshold of €15,000 either.

“This will increase the tax burden of businesses with lower turnovers. The change will affect almost 40,000 business owners, so it will be felt widely,” Brotherus says.

“We propose that the Government gradually raises the small-scale business threshold to €30,000 to prevent the tax burden on businesses with lower turnovers from increasing.”

At the same time, raising the lower VAT rates may cause problems in the sectors it affects, such as sport, culture and accommodation.

“The same companies have just suffered from the Covid years and the last government’s restrictions,” Brotherus says.

“The programme also lacks incentives to invest and run businesses. On the whole, taxation will stay about the same. In this regard, the programme leaves something to be desired,” he says.

Balancing the books

Brotherus thinks that state borrowing will stop when the Government balances the public finances by six billion euros. About four billion will come from savings and two billion from increased employment.

“The big picture of the Government Programme’s economic policy is credible, the scale of the adjustments is right and the schedule is brisk. Adjustments will be made right from next year in line with the demands of the Economic Policy Council,” Brotherus says.

“Orpo’s financial programme is sure to please credit rating agencies. With successful implementation, Finland could even stretch into the AAA group with the other Nordic countries,” he says.

Brotherus does not believe that the Government Programme’s goal of one hundred thousand more people in employment will be reached. However, the number could be raised through promotion of local bargaining, which is not included in calculations.

Brotherus says that labour availability is already a key barrier to SMEs’ growth, and that an ageing Finland will continue to need workers from abroad.

“Unfortunately, the restrictions on labour-based immigration will weaken the outlook for increasing the numbers of people in work,” Brotherus says.

“It’s critical for the individual and society to get more people onto the labour market. At the same time, we have to make sure that employment services’ resources and the opportunities of the partially disabled to be part of the labour market are reinforced.”

Read more articles about the Government Programme here.

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