2008 OECD Economic Surveys: Finland 2008

image of OECD Economic Surveys: Finland 2008

This 2008 edition of OECD's periodic survey of Finland's economy opens with a chapter examining how Finland can get the most out of Globalisation. It then reviews recent economic performance and examines key economic issues Finland faces including tax policy, the municipal services sector, a better functioning labour market, making tertiary education as good as compulsory education, and accessing and integrating foreign labour.

English Also available in: French

Setting tax policies that support the Nordic model

Finland’s extensive welfare arrangements require a relatively high overall level of taxation. Partly as a response to increased international integration, Finland introduced the dual income tax system at the beginning of the 1990s. Under this system companies and personal capital income are taxed at a relatively low rate on a broad base, while labour income is taxed more heavily. This has made corporate and capital taxation more competitive, without significantly lowering the total tax take. However, the dual income tax system has introduced incentives for some groups of workers to re-classify labour as capital income. In addition, there are concerns about the potential implications of high taxes on labour demand and supply. Although taxation of high-income workers has been reduced, it remains high by international standards. In the context of globalisation, there are concerns that high taxation of skilled workers may encourage more offshoring of highly skilled jobs, and potentially outward migration. In contrast, immobile factors such as property are taxed lightly.

English Also available in: French

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