Labour market parties shoot down the Minister’s proposal of income tax cuts to partly replace pay rise

The summer holiday season is coming to a close in Finland. People return to work and schools have already started. At the same time the debate on the next round of collective agreements has got underway.

Minister of Finance, Chairperson of the Centre Party Annika Saarikko said in the beginning of August that she would be ready to consider income tax cuts if pay rises in new  collective agreements are “moderate”. This means a pay rise below the level of inflation, which is predicted to be three per cent next year.

Saarikko’s proposal is nothing surprising. Tax cuts are usually the first – and often only – cure the right-wing parties offer up for any situation or problem. It is also convenient for companies, as it partly finances pay rises from public money instead of company profits.

However, Saarikko’s proposal stirred up memories of the trilateral national level salary framework agreements whereby the Government linked tax cuts with social policy reforms and other such measures. In 2016, the employers’ association EK began to refuse to take part in any national level labour market agreements. Since then, the employers have been fiercely opposed to national deals.

Jaakko Ruohoniemi, CEO of the Technology Industry Employers, confirms this once again in an interview with Yle Uutiset. He says that pay rises and tax levels shall not be linked in the same package.

Nor do the trade unions agree with the Minister either. The Industrial Union says that tax cuts would erode the financial base of the welfare society and would not focus on those with small and medium incomes, who are the ones most in need of support.

Riku Aalto, the President of the Industrial Union, says that with such income tax cuts the union members would in a way buy their own pay rise. This is something Aalto is not interested in at all.

Millariikka Rytkönen, President of Tehy – The Union of Health and Social Care Professionals in Finland, do not see any benefits from an income tax cut either. How do the Ministry of Finance think cutting taxes will solve the shortage of nurses, she asked on Yle Uutiset. Health care needs more money, the discussion on tax cuts is strange in this connection, Rytkönen pointed out.

Instead, Riku Aalto proposed a change in the employees’ pension insurance contribution. This is paid by both employees and employers. In 2016, the right-wing Government forced unions to accept that from now on employees would pay a bigger share of contributions, transferring more costs from companies to employees. Now, Aalto says this could be changed back and this would diminish the pressure during collective bargaining. As is to be expected, the employers are strictly against this move.

Helsinki 12.08.2022 – Heikki Jokinen

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