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Published: 10 July 2008

Tax ratio declined in 2007 despite rapid growth in tax accrual

According to Statistics Finland's revised data, the ratio of taxes and compulsory social security contributions to gross domestic product was 43.0 per cent in 2007. One year earlier, the ratio was 0.5 percentage points higher. The total accrual of taxes and compulsory social security contributions went up by 6.3 per cent from the previous year and stood at EUR 77.2 billion. Nevertherless, the tax ratio declined from the year before as GDP grew by 7.6 per cent in nominal terms. The net tax ratio, i.e. the tax ratio less current and capital transfers and subsidies paid to the private sector, rose by 0.5 percentage points to 22.3 per cent. The explanation to the development in the tax ratio is that the public transfers grew more slowly than GDP and the accrual of taxes and compulsory social security contributions.

The tax revenues of the state and municipalities increased by 6.1 and 7.7 per cent, respectively, from the previous year. The main reason for the growth was a strong increase in the amount of income tax corporations and households paid. The sum of wages and salaries received by households grew as earnings level rose and employment improved. The growth in the taxes paid by corporations was due to the growth in their entrepreneurial income. Entrepreneurial income in national accounts is roughly the same as profit before taxes and dividends in business bookkeeping.

The collected amount of compulsory social security contributions was 5.5 per cent higher than in the year before. The amount of collected employment pension contributions grew by 6.2 per cent. The total accrual of compulsory social security contributions rose to EUR 21.4 billion.

Taxes and compulsory social security contributions by receiving sector

	2000	2001	2002	2003	2004	2005	2006*	2007*
	EUR million
Total	62,418	62,334	64,186	64,187	66,191	69,120	72,615	77,225
State	34,310	32,929	34,667	34,824	35,966	37,244	38,378	40,722
- Income and property tax	13,973	12,098	12,676	11,806	12,319	12,749	12,888	14,384
- Value-added tax	10,869	11,118	11,680	12,455	12,949	13,658	14,418	15,000
Municipalities	13,484	13,807	13,773	13,538	13,778	14,330	15,299	16,478
Social security funds	14,486	15,473	15,640	15,721	16,317	17,392	18,762	19,825
European Union	139	127	106	104	130	154	176	200
	Relative to GDP, %
Total	47.2	44.6	44.6	44.0	43.4	43.9	43.5	43.0
State	25.9	23.5	24.1	23.9	23.6	23.7	23.0	22.7
- Income and property tax	10.6	8.6	8.8	8.1	8.1	8.1	7.7	8.0
- Value-added tax	8.2	7.9	8.1	8.5	8.5	8.7	8.6	8.3
Municipalities	10.2	9.9	9.6	9.3	9.0	9.1	9.2	9.2
Social security funds	11.0	11.1	10.9	10.8	10.7	11.1	11.2	11.0
European Union	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1

* = preliminary data

Source: Taxes and tax-like payments 2007. Statistics Finland

Inquiries: Mr Asko Kauppinen +358 9 1734 3216, skt.95@stat.fi

Director in charge: Mr Ari Tyrkkö

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Last updated 10.7.2008