Finland Opts for Tax Cuts to Revive Economy Amid Rising Deficit Concerns

Finland's government is offering tax reductions to invigorate its sluggish economy. The corporate tax rate will drop from 20% to 18%, and employee income taxes will be reduced by 1.1 billion euros. Despite efforts to stabilize public debt, the 2024 deficit exceeds EU limits, raising fiscal concerns.

In a strategic move to rejuvenate its stagnant economy, Finland's government has rolled out significant tax breaks for both corporations and employees. This comes after its mid-term budget review unveiled a plan to reduce the corporate tax rate from 20% to 18% while cutting employee income taxes by 1.1 billion euros.

Prime Minister Petteri Orpo emphasized making Finland a top investment destination in Europe following two intensive days of budget discussions. He highlighted that economic growth is crucial to financing increased government spending, including on defense.

Despite the government's commitment to stabilizing public debt by 2027, the fiscal deficit has surpassed the EU's 3% limit. Finance Minister Riikka Purra acknowledged missing initial fiscal deficit targets, with projections reaching up to 4.4% of GDP due to global trade tensions.

(With inputs from agencies.)