The Finnish Government is looking for new ways to increase public revenue. The Ministry of Finance has presented amendments to the VAT Act and the Insurance Premium Tax Act before the Parliament to increase the standard VAT rates.
The increase in the STD VAT rate is often seen as a risky and politically challenging move because it can lead to strong public disapproval, which could inherently decrease the level of positive sentiment towards the leading party. However, in this case, and at the present time, the Ministry of Finance and the Government are resiliently pushing for this legislative change.
Timeline
The proposed draft of the Value Added Tax Act proposes increasing the Standard VAT and Insurance Tax rates starting September 1, 2024.
Regulatory Impact
The Ministry of Finance’s proposal increases the STD VAT rate and STD Insurance tax rate from 24% to 25.5%. If the Parliament adopts the VAT Act and Insurance Premium Tax Act amendments, Finland will join the EU countries with the highest Standard VAT rate.
This rate increase will undoubtedly have a serious impact on retail prices. On the one hand, the vendors would need to address this when defining new prices according to the VAT rate increase and how they will approach this change, and on the other hand, customers’ expenditures on the same products and services they purchase monthly will probably be higher.
The Ministry of Finance has submitted amendments to the VAT Act and Insurance Premium Tax Act before Parliament, expressing the necessity of increasing the Standard Rates from 24% to 25.5%. If the Parliament adopts the draft Law, the changes will become effective on September 1, 2024.
Taxable persons, domestic or foreign that make taxable supplies within the scope of Finnish VAT legislation should cautiously follow possible changes and be ready to act promptly if the bill passes Parliament.
Aleksandar Delic
1stopVAT Senior Indirect Tax Researcher (Global Content)