|Updated: 11.7.2013 - Next update: 11.7.2014|
Tax ratio 44.1 per cent in 2012
The tax ratio was 44.1 in 2012 and increased for the second year in a row. The tax ratio describes the ratio of taxes and compulsory social security contributions to gross domestic product. In 2011, the tax ratio was 43.7 per cent. The accrual of taxes and compulsory social security contributions grew by 3.0 per cent in 2012. The total accrual amounted to EUR 84.9 billion. The tax ratio for 2012 went up by 0.5 percentage points because GDP became revised from the preliminary data released in March. The data on the accrual of taxes did not become significantly revised from previously released data. These data are based on the revised national accounts data for 2012.
The revenue from households' income tax rose by 3.2 per cent and totalled approximately EUR 24.8 billion. The value added tax revenue grew by 3.6 per cent and was EUR 17.6 billion. The revenue from employers' employment pension contributions increased by 4.0 per cent. Employment pension contributions by the insured grew by 12.7 per cent. The corporation tax revenue decreased by EUR 0.9 billion from last year. The decrease in corporation tax revenue was affected by, for instance, a drop in the tax rate in 2012.
The tax revenue of the state totalled EUR 40.1 billion, which is 2.0 per cent more than one year previously. The tax accrual of municipalities grew by one per cent and was EUR 19.4 billion. Social security funds accrued compulsory social security contributions to the tune of EUR 25.2 billion, or 6.2 per cent more than one year earlier. Only social security funds' accrual of taxes and contributions grew relative to GDP.
Net tax ratio decreased to 18.3 per cent from 18.8 per cent the year before. The net tax ratio is calculated by deducting the subsidies, and current and capital transfers paid by general government to households and enterprises from the tax ratio.
Source: National Accounts, Statistics FinlandStatistical release
Statistics Finland / Taxes and tax-like payments
Description of indicator
Tax ratio describes the amount of compulsory taxes and other levies collected by general government during the year, expressed as a percentage of GDP for that year.
Total tax ratio is one of the commonest measures used in international comparisons of public sector sizes.
The development of general government finances and the balance between expenditure and revenue directly influence the level and need for taxation. A characteristic feature of the welfare state has been the wide range of public sector tasks and large public social expenditure, which has been reflected in Finland’s high taxation rate and taxation directed at many different sectors. A prerequisite for economic development and the balance of public finances, moreover, is to ensure sufficient employment to enable a sufficient level of tax revenue and thereby cover the funding of public income transfers.
The targeting of taxation also has significant spill-over effects on the operating conditions and competitiveness of the business sector and industry. The economic effects of the national tax system are particularly highlighted in today’s global market. In terms of the vitality of industry, the tax system must be sufficiently clear and predictable. The level of taxation should also be reasonable to ensure that practising business activity in Finland is profitable and competitive relative to international competitors.
Taxation is also reflected in the development of households’ purchasing power, and therefore in growth prospects for demand and trade. Tax policy can steer citizens’ consumption in a desired direction by taxing in a targeted way certain commodities with excise duties, for example. Moreover, the government can at the same time use tax solutions to encourage entrepreneurs to invest and to activate consumer demand when the economy is weak.