The financial sector is one of
Finland’s major taxpayers
– its total tax footprint equals the costs
of the country’s entire transportation network
- The Finnish financial sector’s tax footprint totalled 4 billion euros in 2019. This is roughly equal to the sum of money used to build and maintain Finland’s road network plus the budget of the Ministry of Transport and Communications.
- The financial sector’s tax footprint includes corporate income tax (€654 million), insurance premium tax (€789 million), and contributions towards fire protection, road safety and industrial safety (€22 million). Moreover, the sector generates employee income tax (€939 million) and social security contributions (€577 million), and pays non-deductible VAT for approximately €450 million. The dividends paid by the sector are subject to a withholding tax (€527 million).
- The financial sector’s €654 million constitutes 11.2% of all corporate income tax paid in Finland.
- The top 6 payers of corporate income tax included three financial sector companies: OP Financial Group (3rd place), Nordea (5th place) and Sampo Group (6th place)
Finnish banks have not needed rescuing with taxpayer money
The financial sector is a responsible builder of well-being in the society, providing efficient financing, insurance and investment services to companies and households as long as it is not weighed down by new regulatory burden. This is especially important now as we are striving to enter a period of new growth and prosperity as soon as the coronavirus pandemic is over.
Finnish banks have not needed to resort to taxpayer money during financial crises. The sector has operated responsibly and maintained its stability in the ebb and flow of the global economy. There have been no observable moral hazard problems. The healthy banking sector has been able to help households and companies during the coronavirus pandemic.
Hidden VAT costs of €450 million euros
Financing and insurance services are exempt from value added tax according to the EU VAT directive. Reasons for this exemption include the difficulty to define the tax base, technical implementation, and international competition.
Unlike most companies, financial sector companies cannot deduct the VAT for the goods and services they purchase. FFI conducted an assessment estimating this VAT amounted for approximately €450 million in 2019.
The VAT exemption is beneficial for individual retail customers, but for corporate customers, the non-deductible VAT raises prices compared to a scenario where companies could deduct VAT from their purchases. In this light, the claim that the VAT exemption causes the sector to be undertaxed is false.
EU stability contributions of €216 million
In addition to the national taxes and contributions, Finnish credit institutions paid stability contributions to the EU Single Resolution Fund for €216 million in 2019. In 2020 this contribution rose to €235 million.
Stability contributions from Finnish credit institutions collected until the end of 2020 total €816 million. By 2024 this sum is estimated to be €1.5 billion.