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That assumption is probably wrong. Progressive income tax is no longer a very relevant factor for financing BI, or anything, in Finland. The main purpose of pr

That assumption is probably wrong. Progressive income tax is no longer a very relevant factor for financing BI, or anything, in Finland. The main purpose of progressive tax in Finland is no longer about collecting revenue; it is about punishing those who are doing too well. That is very apparent from the public discourse. So yes, Finland is likely somewhere on the right hand side of Laffer curve, particularly for high earners. (For low earners, many countries are; that's where BI system might help). Your location on Laffer curve is of course hard to prove because the world is such a volatile place -- you cannot experiment with different tax rates and see what happens, because all the other factors impacting revenue are changing all the time so no trial will produce consistent results. But Finnish income tax progression is just about the tightest in the world. The highest decile (anyone earning more than €50k a year, gross) pays about 43 % of income tax revenue [0]. However, that revenue pales beside revenue from consumption taxes (VAT, which is now 25%, and fuel taxes, and vehicle taxes). The country's tax revenue is higher than ever, but it is not enough when government spending goes up even faster. Public deficit is about 3.3 % of GDP [1]. Whatever we do with taxes is not going to fix that hole. Some control on the money-flow out will be needed. Finland also does not spend as much as you would expect on health, schools, military, infrastructure, public security and just about anything you normally think of as the government's role. There is one major thing where Finland spends comparatively more than other developed nations: transfers. The motto of government seems to be "if it moves, tax it; when it eventually stops moving, subsidize it". And many people who are about to make a lot of money (e.g. sell the company they've grown) will run to Sweden as a tax refugee. Think about that. Run to Sweden as a tax refugee. [0] http://tilastokeskus.fi/tup/suoluk/suoluk_tulot.html http://tilastokeskus.fi/tup/suoluk/suoluk_tulot.html [1] http://www.findikaattori.fi/fi/44 http://www.findikaattori.fi/fi/44

lhopki01 11y ago
Consumptions taxes hit poorer people much harder than rich people. A top rate of 43% isn't that high. The top rate in the UK is higher. Granted it kicks in higher but it's still set at 45%.
- ptaipale 11y ago
  That's not the top rate. The top rate is a bit over 60 % of gross amount. 43 % is the proportion of tax revenue paid by the top decile. (10 % of taxpayers pays 43 % of revenue.)
- charlesdm 11y ago
  The difference being that you don't pay income tax when you sell a business, you pay capital gains. Those are usually taxed at a significant lower rate (or not at all, depending on the country) For wealthy people, income tax doesn't matter as much as capital gains
  - ptaipale 11y ago
    Exactly. Competition keeps capital gains taxes reasonable, but that doesn't apply to earned income tax. CGT is a mildly progressive 30-33 % here. If the government were trying to get 60 % which is my marginal tax rate for earned income, their revenue would likely plummet because there would not be much sense in showing capital gains in this country. Anyone selling a business etc would move to that great tax haven, Sweden, for the year when they sell. For us workers, the best tax planning option is to switch earnings to non-taxable form like working for ourselves. E.g. if I want to have a new garden shed, I don't pay someone to build it. I take unpaid leave from work and build it myself. This way, the tax office pays most of my garden shed. This country has probably the most expensive carpenters you can think of...
    - charlesdm 11y ago
      Indeed. Income earners usually can't escape the income tax. Capitalists very easily can. Or they at least can defer it indefinitely and live off of investment gains (for example, by using holding and investment vehicles) At the end of the day, it's simple math. Live in country X, pay 33% when sold. Live in country Y, pay 15% when sold. Live in country Z, pay nothing. When we're talking about millions in tax, Monaco/Belgium/Malta/the UK do become very attractive very fast. After all, you can always return a few years later and live like a king.
saiya-jin 11y ago
if running away from this country, why not to say Netherland, Malta, Monaco, Suisse etc. where taxes are not so ridiculous? Is there some bilat agreement for choosing Sweden, already ridiculous place tax-wise?
- ptaipale 11y ago
  Sweden is slightly less ridiculous, particularly for the very richest. And it is culturally and geographically close - in case you want to visit that aunt, and want to set up a company, and whatever. The way society, legislation etc. operates in Sweden is familiar. (Some laws passed by the Swedish king in 1734 were valid legislation in Finland until replaced quite recently, 1996.) But of course people are running elsewhere as well. Recently there has been fuss about wealthy pensioners moving to Portugal where they pay no tax.

lhopki01 11y ago

Consumptions taxes hit poorer people much harder than rich people. A top rate of 43% isn't that high. The top rate in the UK is higher. Granted it kicks in higher but it's still set at 45%.

ptaipale 11y ago
That's not the top rate. The top rate is a bit over 60 % of gross amount. 43 % is the proportion of tax revenue paid by the top decile. (10 % of taxpayers pays 43 % of revenue.)
charlesdm 11y ago
The difference being that you don't pay income tax when you sell a business, you pay capital gains. Those are usually taxed at a significant lower rate (or not at all, depending on the country) For wealthy people, income tax doesn't matter as much as capital gains
- ptaipale 11y ago
  Exactly. Competition keeps capital gains taxes reasonable, but that doesn't apply to earned income tax. CGT is a mildly progressive 30-33 % here. If the government were trying to get 60 % which is my marginal tax rate for earned income, their revenue would likely plummet because there would not be much sense in showing capital gains in this country. Anyone selling a business etc would move to that great tax haven, Sweden, for the year when they sell. For us workers, the best tax planning option is to switch earnings to non-taxable form like working for ourselves. E.g. if I want to have a new garden shed, I don't pay someone to build it. I take unpaid leave from work and build it myself. This way, the tax office pays most of my garden shed. This country has probably the most expensive carpenters you can think of...
  - charlesdm 11y ago
    Indeed. Income earners usually can't escape the income tax. Capitalists very easily can. Or they at least can defer it indefinitely and live off of investment gains (for example, by using holding and investment vehicles) At the end of the day, it's simple math. Live in country X, pay 33% when sold. Live in country Y, pay 15% when sold. Live in country Z, pay nothing. When we're talking about millions in tax, Monaco/Belgium/Malta/the UK do become very attractive very fast. After all, you can always return a few years later and live like a king.

saiya-jin 11y ago

if running away from this country, why not to say Netherland, Malta, Monaco, Suisse etc. where taxes are not so ridiculous? Is there some bilat agreement for choosing Sweden, already ridiculous place tax-wise?

ptaipale 11y ago
Sweden is slightly less ridiculous, particularly for the very richest. And it is culturally and geographically close - in case you want to visit that aunt, and want to set up a company, and whatever. The way society, legislation etc. operates in Sweden is familiar. (Some laws passed by the Swedish king in 1734 were valid legislation in Finland until replaced quite recently, 1996.) But of course people are running elsewhere as well. Recently there has been fuss about wealthy pensioners moving to Portugal where they pay no tax.