OECD warns against going ahead with basic income plan

Experts of the Organization for Economic Cooperation and Development (OECD) have suggested that Finland should give up the plan for a universal basic income, which has caught the eyes of international audience.

In its country report for Finland published on Wednesday, OECD concluded that the envisaged Finnish basic income plan would either be too expensive to the state or provide scanty social security and could even increase poverty. The current system should be developed instead.

Finland started to test the basic income for the unemployed at the beginning of 2017, as an effort to see if the unconditional financial support will increase the incentive for recipients to look for jobs. The second phase of the test was to include other groups than unemployed, but no decision has been taken to start it.

The economic survey of Finland presented by OECD Deputy Secretary General Mari Kiviniemi, former prime minter of Finland, noted that a Finnish jobless person would earn less by taking up a job than the counterparts in Sweden or Norway.

As a recommendation to create incentives for work, Kiviniemi told a press conference in Helsinki that Finland should adjust taxation and decrease benefits given to working age people. Social security should be maintained at its present level.

The current financial compensation for taking care of children at home should be terminated as well, the report suggested.

The remarks from OECD came just weeks after the current Finnish coalition government gave up a plan to reduce the compensation for taking care of under-three-year-olds at home. The reform was called off due to the opposition from the populists and centrists that have their core support in rural communities.

Local commentators said on Wednesday that the ideas of curbing the benefits for working age people would create strong political resistance.

Parliamentary elections will take place in April next year and the current coalition is not likely to introduce any new plans to reduce benefits.

Finland has just experienced a wave of labor action in protest against fresh legislation to reduce jobless benefits if the recipients do not look actively for work.

OECD admitted that the financing of a welfare state is increasingly difficult due to international tax competition. At the same time, Finland should decrease the taxation on salaries in order to make employment attractive.

To compensate the decline in income tax revenue, the report recommended an increase in real estate taxation. Currently, the Finnish real estate tax levels are below the real value of the properties.

It also criticized the system that allows a lower value-added taxation for several branches such as food and medicine.

Finland has decreased the corporate tax levels more than some of its competitive countries and OECD did not suggest an increase. Instead, it underlined the need to succeed in international efforts to curb tax evasion by companies.

OECD predicted that the economic growth in Finland would be 2.5 percent this year and 2.0 percent next year.

The recommendations given by OECD have been generally followed by Finland in recent years. Many policies of the current center-right coalition government have appeared earlier in suggestions given by OECD.