Taxation | The tax administration demands the postponement of the disputed capital gains tax

The government the draft proposal for the so-called value increase tax receives criticism, especially from the business world, but legal scholars and supporters of the tax also consider the draft incomplete.

The Ministry of Finance admits that there is a “schedule challenge” in completing the final bill.

Last fall, the government outlined a reform that is intended to prevent wealthy individuals from moving from Finland to a low-tax country in order to avoid taxes. The tax would target the increase in property value in situations where Finland’s right to tax is currently interrupted. Critics have also called it an exit tax.

The decision has sparked a lot of controversy along the way. For example, the chairman of the association Petteri Orpo promised to cancel the taxif the party comes to power.

The round of comments on the long-prepared draft law ended on Monday.

Read more: The government’s decision on the new capital gains tax raised a fierce controversy: This is what the tax is about, HS reviews the advantages and disadvantages

Nearly all those who commented on the draft law demanded extensive further preparation and more detailed investigation if the tax is to be promoted. Nature is criticized for the lack of details and justifications.

This is the opinion of, among others, the Tax Administration, which demands that the entry into force of the value-added tax be postponed until 2024.

Now the new tax was supposed to come into effect from the beginning of 2023, but according to the Tax Administration, it would take half a year for the system changes required by the value-added tax. In its 18-page statement, it also points out several needs for correction.

The implementation of the tax has been considered difficult in terms of drafting the law, which is also noted by the Tax Administration. In its report completed in February 2020, the tax department of the Ministry of Finance came to the conclusion that Finland should not, at least at this stage, start preparing a value-added tax.

Also jurists find many inaccuracies and corrections in the draft. The Bar Association points out, for example, that the proposed legal text contains situations of double taxation.

In the opinion of the business community, the Association of Municipalities and, for example, the city of Helsinki, the show should be abandoned completely. They are afraid that the new tax would be harmful to Finland’s competitiveness and country’s image, among other things.

At least STTK and SAK, which represent the employees, and the non-governmental organization Finnwatch support the introduction of the tax. However, the latter two point out in their statements that there is still plenty of clarification in the draft law.

Final the government’s bill is supposed to be submitted to the parliament no later than October 20. The government and the parliament have agreed on this as the deadline for proposals that are wanted to be processed before the turn of the year.

“It is now the middle of September. It is perhaps obvious that there is a scheduling challenge here,” says the negotiating official Minna Upola from the Ministry of Finance.

“As a preparatory civil servant, I say that we do our best.”

The value-added tax has also been selected for consideration by the Legislation Evaluation Council. The ministry must first go through the opinion feedback and send the draft law to the council in as final a form as possible. After that, the council evaluates the draft law and gives its opinion within four weeks.

The bill according to which the tax would be applied to natural persons who, before moving out of Finland, were generally liable for taxes in Finland and whose country of residence according to the tax treaty would have been Finland for at least four years during the 10 years before moving out of Finland.

In principle, the scope of the regulation would include movable property, such as shares, investment fund units and virtual currencies.

However, the regulation would not be applied if the total fair value of the property subject to capital appreciation income was less than EUR 500,000 and the amount of the imputed capital gain of said property was less than EUR 100,000.