Finland’s Ministry of Finance submitted its proposal for the 2025 Budget and other related legislative proposals to the Parliament on 23 September 2024. The budget’s central government expenditure amounts to EUR 88.8 billion and revenue to EUR 76.6 billion, with a deficit of EUR 12.1 billion.
The total amount of the budget represents an increase of approximately EUR 0.8 billion on the budget for 2024 (supplementary budgets included).
The Government Programme is committing to strengthening general government finances by EUR 6 billion, and the spring government session on spending limits decided on additional adjustments totalling EUR 3 billion.
The 2025 budget proposal implements these decisions and does not include decisions on new adjustment measures.
The Ministry has also released an overview detailing the forthcoming changes to taxation, as outlined in the Budget. The key changes relate to individual income tax brackets and rates and to the application of reduced VAT rates.
Changes to reduced rates of VAT
According to the government programme, goods currently subject to a reduced rate of 10% would, with some exceptions, be transferred to a reduced rate of 14%. However, this change would not apply to newspapers, magazines, or broadcasting.
Menstrual pads, incontinence protection and children’s diapers would be transferred from the scope of the general tax rate to the reduced tax rate of 14%.
The alcohol tax on strong alcoholic beverages will be increased in line with the anticipated consumer price index growth from 2025 to 2027. Annual tax increases are projected to range from 1.3% to 1.8%, culminating in a total increase of 4.6%.
Additionally, the vehicle tax on electric cars and plug-in hybrids will be raised at varying rates based on the specific type of vehicle. The basic tax on electric cars would be increased by about EUR 53 and the average tax on driving power by about EUR 35 annually. The basic tax on rechargeable hybrid vehicles would increase by an average of about EUR 37 per year.
Individual income tax brackets and rates
The main changes to the individual income tax involve a 3.4% increase in bracket thresholds (excluding the top two), a 0.25% increase in the highest rate, and a 0.25% reduction in the second highest rate, resulting in updated brackets and rates:
- up to EUR 21,200 – 12.64%
- EUR 21,200 to 31,500 – 19.00%
- EUR 31,500 to 52,100 – 30.25%
- EUR 52,100 to 88,200 – 34.00%
- EUR 88,200 to 150,000 – 41.75%
- Over EUR 150,000 – 44.25%
