Green taxation reform likely option for new govt

Finnish politicians largely welcomed on Wednesday a blueprint of a radical tax reform published by the independent, public service think tank Sitra.

In the plan, taxation on work and business activity would be drastically lowered, while both households and industries would be penalized for consumption and production that is detrimental to the environment. The report predicted that tens of thousands of new jobs would be created while emissions decline.

Dr. Saara Tamminen, a leading expert at Sitra, told Finnish language business daily Kauppalehti that the new tax, to be levied based on the total emission of a product throughout its life cycle, would target both domestic products and services and imports.

Sitra said the state tax revenue could increase by as much as 7 billion euros annually. That would compensate the lowered income tax.

Sitra underlined that a reduction of income tax would create more employment and growth than directing tax concessions to enterprises.

The reform would be "budget neutral". The state budget would not increase or decrease, and thus public services would not have to be curtailed.

Described by domestic observers as a draft for the upcoming government, the plan was welcomed both by the Suomen Sosialidemokraattinen Puolue (Social Democratic Party of Finland-SDP) and the Kansallinen Kokoomus (National Coalition Party), but dismissed in comments by the populist Perussuomalaiset (Finns Party).

Matti Putkonen, media spokesman of the Perussuomalaiset (Finns Party), said the envisaged lowering of taxes on salaries and pensions is not enough for the low income cohort. The party repeated its line that those countries that pollute the most must also take the largest responsibility.

Anneli Hertsi, a commentator for Kauppalehti, noted Sitra's plan is a developed version of the idea for extra value added tax on environmentally harmful products put forward by the SDP chairman Antti Rinne during the election campaign.

The results of the national parliamentary election were confirmed on Wednesday. The social democrats stayed the biggest party and Rinne would likely to be designated as the prime minister, responsible for forming a new government.

MP Juhana Vartiainen of Kokoomus, summed up that through a change of focus in taxation, better wellbeing as well as a better environment can be created.

Maria Ohisalo, the vice chairman of the Vihreä Liitto (Green League), said the plan indicates that it is possible to tax activities detrimental to the environment and at the same time to compensate the low income earners.

Tuula Hakola-Uusitalo, a high official at the Ministry of Finance, told national broadcaster Yle she believes the upcoming government program will include "sticks and carrots" in the taxation field, to some extent.

However, both Hakola-Uusitalo and Sixten Korkman, a professor emeritus at Aalto University, doubted the idea of taxing the lifecycle emission. Korkman described it as "utopia" and said "a huge amount of data would have to be available about the emission of products and it would be difficult to gather."

Sitra submitted also an alternative solution that would target emission-heavy production with taxation, and environmentally negative tax concessions would be cancelled. But Sitra said this would create less employment than the consumption tax policy.