A woman and a man at a workplace. Photo: Elsa Paakkinen / Lehtikuva
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Most wage earners in Finland will pay less income tax in 2026, but the benefit will be reduced by a proposed rise in unemployment insurance contributions.
New calculations published by the Finnish Taxpayers’ Association show that workers earning €2,000 a month, or €25,000 annually, will see a €30 increase in their annual tax burden. For many in low- to middle-income brackets, the planned tax cuts will be neutralised by rising deductions.
The changes follow a proposal by the board of the Employment Fund, which has called for a 0.6 percentage point increase in total unemployment insurance contributions next year. This would raise the average employer contribution to 0.92 percent of salary and the employee contribution to 0.89 percent.
Currently, employees pay 0.59 percent and employers pay 0.2 percent on annual salaries up to €2.5 million, and 0.8 percent on income above that threshold. Under the proposed structure, those rates would rise to 0.31 percent and 1.23 percent respectively.
The increase is intended to cover unemployment benefits, which have grown amid persistent job market difficulties and weaker economic forecasts.
According to Employment Fund figures, a worker earning €4,000 a month will see their unemployment insurance payment rise by €144 a year, from just over €283 at present.
Despite this, most income groups are expected to experience a net tax decrease. Those earning €3,000 monthly will pay roughly €200 less in taxes than this year. However, the effect is smaller for those earning between €40,000 and €75,000 annually.
The largest gains will go to those with annual earnings over €100,000. These taxpayers will save approximately €200 more in income tax, with those on salaries as high as €250,000 gaining up to €8,500 a year.
The government has proposed a reduction in the top marginal income tax rate to about 52 percent and will skip index adjustments for high earners, further enhancing their tax benefit.
The Taxpayers’ Association calculations include the government’s €100 million increase in the earned income deduction, but not changes related to union fees, tax-deductible workspace allowances, or the removal of the tax exemption for employer-provided bicycles.
The association’s chief economist Mikael Kirkko-Jaakkola said the reforms create a broad-based reduction in tax burden but warned that higher unemployment insurance payments will significantly reduce or, for some, completely cancel out the benefits of lower income tax.
Prime Minister Petteri Orpo said the proposed 0.6 percentage point hike represents a moderate increase and aligns with earlier government appeals to avoid steep rises that would offset tax cuts.
Speaking to Yle, Orpo said the Employment Fund’s proposal “leans towards the lower end” of its earlier forecast range, which had projected a possible increase of 0.5 to 1.5 percentage points.
Opposition leader Antti Lindtman, chair of the Social Democratic Party, criticised Orpo’s earlier appeals to the Employment Fund as political interference. He said he would monitor the fund’s proposal closely.
The Employment Fund’s proposal has now been submitted to its supervisory board, which will issue its final recommendation to the Ministry of Social Affairs and Health later this week. Parliament will decide on the final contribution rates in the autumn.
HT
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Source: www.helsinkitimes.fi
