Susanne Päivärinta, an MP for Finland’s National Coalition Party, warns that relying on tax increases to balance the public finances would lead to a cycle of repeated tax hikes as an ageing population continues to push up expenditure.
According to Päivärinta, a tax increase would provide only a one-off fix while public spending would continue to rise year after year unless structural changes are made.
– A tax increase is a one-time patch. At the same time, expenditure keeps growing every year unless we do something about it. If fiscal adjustment is carried out by raising taxes, taxpayers will simply be sent another bill next year, the year after that and indefinitely, Päivärinta says.
She argues that bringing public expenditure under control is the only way to address the underlying problem.
Finland’s public spending currently exceeds government revenue, with the gap covered through borrowing. Päivärinta describes public debt as taxation deferred to future generations.
At the same time, Finland’s working-age population is shrinking relative to the number of pensioners, meaning that future tax increases would fall on an increasingly narrow group of taxpayers.
– We cannot keep raising taxes indefinitely on a shrinking working-age population. If we increase taxes on work and entrepreneurship, we weaken incentives to work, hire and invest, while narrowing the very tax base that funds public services, she says.
Päivärinta also argues that tax increases are too often presented as an easier alternative to spending cuts, even though higher taxes also have a direct impact on households.
Higher income and pension taxation leaves people with less disposable income, while increases in consumption taxes further weaken purchasing power, she says.
– A tax increase also takes money out of someone’s pocket. When households have less to spend in shops and on services, Finnish businesses feel the impact as well.
Party proposes €9 billion in spending cuts
The National Coalition Party has proposed €9 billion in spending reductions for the next parliamentary term without further tax increases.
According to the party, the adjustment would be achieved by restraining expenditure, reforming public administration and prioritising government spending.
Päivärinta says postponing spending decisions would only make future choices more difficult.
– Our task is to safeguard essential services, make better use of taxpayers’ money and ensure that Finland remains a country where it pays to work and run a business, Päivärinta says.