Lowering Indirect Taxation
High indirect tax rates weaken the position of the grocery trade as well as consumers
Lowering VAT on food to 12%
The Government programme promises to lower Finland's 17% VAT on food, higher than other EU countries, to 12%. This was the computational tax rate before Finland joined the EU.
According to the survey by the research institute Pellervon taloudellinen tutkimuslaitos PTT (and the Government Institute for Economic Research, the lower income bracket households would gain most from a lower VAT rate as their purchasing power would be directly increased. This would make the Finnish food offer more versatile, improving both the competitiveness of the entire food chain and the rate of employment. The final aim is to lower the VAT on food to a level that would correspond to the average EU tax rate, or 7%.
Finnish tax on medium strength beer is still too high
The calculatory decrease of beer tax by 32% in March 2004 translated to a 15% decrease in retail prices. Due to the tough competition in the grocery trade sector and the pressure from tax-free sales, the price of beer dropped much more than that in practice.
As the Estonian tax on beer is only 18 cents per litre, the Finnish beer tax shouldn't be increased. Instead, the current tax on medium strength beer must be further lowered from today's 90 euro cent per litre to 60 cents. Any planned increase in alcohol taxes should be targeted at strong alcoholic beverages, restoring the earlier relationship of mild versus strong alcoholic beverages in terms of taxation.