The financial sector is one of
Finland’s major taxpayers
- The Finnish financial sector’s tax footprint totalled 3.6 billion euros in 2020. This is almost equal to the three-year budget of the country’s basic transport infrastructure management.
- The financial sector’s tax footprint includes corporate income tax (€563 million), insurance premium tax (€820 million), and contributions towards fire protection, road safety and industrial safety (€21 million). Moreover, the sector generates employee income tax (€960 million) and social security contributions (€590 million), and pays non-deductible VAT for approximately €450 million. The dividends paid by the sector are subject to a withholding tax (€188 million).
- The financial sector’s €563 million constitutes 10.3% of all corporate income tax paid in Finland.
- The top payers of corporate income tax included several financial sector companies: Nordea (3rd place), OP Financial Group (4th place), Sampo Group (8th place) and LocalTapiola (16th).
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.
“Banks and insurers have been among the biggest taxpayers in Finland for a long time, thus also financing the welfare society. The sector is best able to promote growth and employment when its taxation and regulation are kept in moderation. New taxes would weaken the Finnish financial sector’s competitiveness and ability to act as a motor of growth”, says Finance Finland’s (FFI) Head of Taxation Lauri Luukkonen.
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 2020.
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 €235 million
In addition to the national taxes and contributions, Finnish credit institutions paid stability contributions to the EU Single Resolution Fund for €235 million in 2020. In 2021 this contribution rose to €270 million.