Tax expenditures

Tax expenditures are exceptions made to the normal basic structure of taxation, which is called the benchmark tax system. They are used to directly or indirectly support a certain branch of industry or group of taxpayers. In practice, tax expenditures refer to tax exemptions, tax deductions, lower tax rates and other comparable measures. Tax expenditures are defined in tax legislation.

Tax expenditures are not usually visible in the expenditure side of the Budget, as direct subsidies are, but they are shown as lost tax revenue. Tax expenditures distributed through the tax system have been regularly monitored and reported in the budget proposal and in the final central government accounts. A list of tax expenditures is published each year at the same time as the budget proposal is submitted to Parliament.

In most cases, it is not possible to calculate the exact amounts of tax expenditures, so their monitoring is based on estimates. For certain tax expenditures, a lack of available data makes it impossible to estimate the amount at all. When looking at tax expenditures, one should also take into consideration that the removal of a tax expenditure does not necessarily increase tax revenue by an equivalent amount. Some tax expenditures overlap, which means they have an effect on each other’s size, and the methods for calculating different tax expenditures also vary. Moreover, calculations do not consider the effects of tax expenditures on prices and taxpayer behaviour, which makes it difficult to assess the ultimate effects of the removal of an individual tax expenditure. For these reasons, it does not make sense to calculate total tax expenditures, and they are not directly comparable in all respects from year to year or to one another.

Nevertheless, it is important to monitor tax expenditures, because they are used to channel significant public support to different objectives. Tax expenditures also narrow the tax base and often complicate the tax system.

Tax expenditure calculations are based on the benchmark tax system. The calculation methods are mainly described in the VATT Institute for Economic Research's preparatory report, Tax expenditures in Finland in 2009. In addition, the annual reporting of tax expenditures is supported by a steering group appointed by the Ministry of Finance, which monitors, evaluates and develops tax expenditure reporting. The steering group takes a stand on how changes in the tax basis are taken into account in determining and calculating tax expenditures. When new tax expenditures are established, the steering group decides on their calculation principles and, where necessary, assesses and develops the calculation methods for the current tax expenditures.

The working group on tax expenditures decides on changes to the calculation of tax expenditures. Documents of the working group on tax expenditures are available in Finnish below.

Tax expenditures

2025

2024

2022

2021

2020

2019

2018

2011

2010