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 it is unlikely that prices will return to their pre-war levels in the near future. Thus, the government introduced a measure to assist citizens with the high energy prices. In addition to the reduction in the value added tax on energy , the measure introduces a four-month temporary electricity tax deduction on income taxation targeting lower-income taxpayers.

Content of measure

The government of Finland announced a plan for a four-month temporary tax deduction on income tax for lower-income individuals. 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 year's 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.

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

The government has earmarked €300 million for this measure.

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) commented on the government’s budget stating that they understand the spending increases in exceptional circumstances. However, they remain critical of 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)