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Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for measure FI-2023-1/2802 – measures in Finland

Temporary tax deduction for high energy bills

Väliaikainen verovähennys korkeisiin sähkölaskuihin

Country Finland , applies nationwide
Time period Temporary, 01 January 2023 – 30 April 2023
Context War in Ukraine
Type Other initiatives or policies
Category Responses to inflation
– Support for energy bills
Author Amanda Kinnunen (Oxford Research) and Eurofound
Measure added 05 September 2022 (updated 16 September 2022)

Background information

Russia's invasion of Ukraine has affected Europe's energy supply and energy prices. The government of Finland stated in the most recent negotiations for budget amendments that a return to the old prices is unlikely to happen in the near future. Thus, the government has introduced a measure package to assist citizens to cope with the high energy prices. In addition to the reduction in the value added tax on energy plans to introduce a four-month temporary electricity tax deduction on income taxation targeting lower-income taxpayers.

Content of measure

The government of Finland has announced a plan to introduce a four-month temporary tax deduction on income taxation for lower-income taxpayers. Only one person per household is eligible for the deduction. The details of the measure are still to be determined and the government has not yet elaborated on how the measure will work in practice. The electricity tax credit is aimed at people who pay enough tax to qualify for a household tax deduction, while a temporary electricity allowance has been announced for those paying little or no tax.

Although the deduction will not take place until the following years’ tax report, those eligible for the deduction can apply for a lower tax rate for 2023, thus having more household liquidity to cope with the high energy prices.

In the preliminary preparations, the deduction could be claimed if the household electricity bill exceeds €500 per month. Of bills above €500, 60% of the amount would be eligible for a deduction. The upper limit in the preparatory documents was set at €1,500. In the same model, the maximum amount that could be subsidised would be €600 per month and €2,400 per year. The subsidy would be available from January to April 2023.

The government has earmarked €300 million for the deduction in the latest budget amendment.

Use of measure

More than 100,000 citizens are expected to be eligible for the deduction.

Target groups

Workers Businesses Citizens
Applies to all workers Does not apply to businesses People on low incomes

Actors and funding

Actors Funding
National government
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role No involvement as case not in social partner domain No involvement as case not in social partner domain
Form Not applicable Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: N/A

Involvement

No information available.

Views and reactions

The leader of the Central Organisation of Finnish Trade Unions (SAK) underlines the it is important that there is a political response to the record high electricity bills. He states that support should be targeted to low-income earners and those hardest hit by the price hike.

The Finnish confederation of Industries (EK) has commented on the government’s budget stating that they understand the spending increases in exceptional circumstances. However, they remain critical to the increasing fiscal debt.

Sources

  • 01 September 2022: Amendment budget gives solutions for curbing t,e rise in electricity prices, clean energy, increasing the vitality of eastern Finland and RDI funding. (Budjettiriihestä ratkaisuja sähkön hinnan nousun hillintään, puhtaaseen energiaan, itäisen Suomen elinvoiman lisäämiseen ja TKI-rahoitukseen.) (tem.fi)
  • 01 September 2022: The VAT on electricity is temporary reduced to 10 percent (Sähkön arvonlisävero laskee väliaikaisesti 10 prosenttiin) (www.sahkoliitto.fi)
  • 01 September 2022: Government's energymeasures praised, debt causes worry (Hallituksen sähkötoimille kiitosta, velkaantuminen arveluttaa) (www.mtvuutiset.fi)
  • 02 September 2022: This is how the new energy allowances will work (Näin uudet sähkötuet toimisivat) (www.hs.fi)

Citation

Eurofound (2022), Temporary tax deduction for high energy bills, measure FI-2023-1/2802 (measures in Finland), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/FI-2023-1_2802.html

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Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.