After a week of wrangling over the city budget, Helsinki political leaders agreed to reduce the municipal income tax rate by 0.5 percent to 18 percent, according to a proposal tabled by new National Coalition Party Mayor Jan Vapaavuori. The lower tax rate will take effect from the beginning of 2018.
The last time that the Finnish capital decided to ease income taxes was 20 years ago. The decision means that a middle income earner taking home a gross salary of about 3,000 euros will have an extra 150 euros to spend at the end of the year. However data from Statistics Finland indicate that high income earners will benefit most from the proposed tax cut.
Left, Greens oppose tax cuts
According to all of the decision makers Yle spoke with, the talks were typically difficult. The Left Alliance and Greens opposed cutting income taxes because it would cost the city 70 million euros in lost income every year. They expressed concerns about what the shortfall could mean for city dwellers’ services.
However it was not all doom and gloom for the Green politicians, as they were able to sway decision makers to accept their proposal to shelve construction plans slated for Vartiosaari in eastern Helsinki. In zoning exercises completed last year city leaders planned to build housing to accommodate up to 7,000 residents in the area. The proposed construction will now be abandoned.
The city board will next consider the budget on Monday and city councillors will make an official decision on it in mid-November. However politicians told Yle that they do not expect major changes after Sunday’s decisions.
Tax impact on income earners
**Monthly pay ** **Annual income ** Annual tax savings (euros)
1,000 12,500 0.0
1,500 18,750 57.1
2,000 25,000 92.0
2,500 31,250 123.1
3,000 37,500 152.7
3,500 43,750 182.3
4,000 50,000 211.8
4,500 56,250 241.5
5,000 62,500 271.1
5,500 68,750 300.6
6,000 75,000 330.2
6,500 81,250 359.8
7,000 87,500 389.4
7,500 93,750 419.0
8,000 100,000 447.3
8,500 106,250 475.5
9,000 112,500 503.7
9,500 118,750 531.9
10,000 125,000 560,1
Source: Statistics Finland
Annual income estimates include vacation pay, i.e. pay for 12.5 months.
