Report on Finland's competitiveness
The report on competitiveness published by the Ministry of Finance on January 29, 2002 describes Finland as a fairly competitive society. The report gives a comprehensive summary of Finnish competitiveness.
Above all, Finland's strengths include a high level of education, advanced information technology, an efficient infrastructure and a comprehensive social security network. On the other hand, Finland's principal weaknesses include first and foremost heavy taxation of labour.
The report discusses, among other things, Finland's potential to compete for profitable business enterprises. Finland is compared with some of the most important competing countries, primarily by referring to international statistics. The report gives an account of Finland's present standing and how our competitiveness has developed in different sectors over the past few years.
According to the report, Finland's competitiveness has developed rather favourably since the mid-1990's, although there has been some deterioration in certain respects. Positive developments can be seen, particularly in the technology sector, where competitiveness has continued to improve, and the stringent growth targets set for investment in research and development have been reached. Moreover, in the light of several indicators, it appears that the increased focus on technology during the past few years has yielded moderately successful results.
The second strong area is education. During the past few years Finland has also developed favourably as an education-centred society, and the willingness of young people to participate in study for qualifications remains at a high level. Similarly, Finnish students' performance in international tests measuring their educational standard has, on average, been good. On the other hand, there are various issues in the education sector that need to be addressed. The duration of studies is long compared to the international average and students embark on university studies, on average, fairly late. If education is to be maintained as a real strength in Finland, its contents and effectiveness should be further improved.
Another area of focus in the Report on Competitiveness is taxation. As far as income taxation is concerned, decisions have been made that, when taken together with factors relating to economic trends, have lightened the tax burden and lowered the employees' tax wedge by a few percentage points.
These decisions have made it possible to improve Finland's relative fiscal position to some degree, but as many other industrial countries have also launched tax reduction programmes of their own, the taxation of labour in Finland remains heavier than the international average. In terms of competitiveness this continues to be a weakness, even though the situation has improved slightly due to recent tax cuts.
The advantage afforded in the past by Finnish corporate taxation policy has evidently been lost. As a backdrop to this development, Finland has gradually raised the level of the corporate tax base while in several other countries it has simultaneously been lowered. There are, however, no exact international comparisons available at present on the level of corporate taxation in different countries.
For additional information please contact:
Permanent Under-Secretary of State Mr. Johnny Åkerholm, tel. +358 9 160 3091 or
Director of Public Finance Unit Mr. Pertti Kohi, tel. +358 9 160 4880