Finnish Taxes

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Chaapa
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Finnish Taxes

Post by Chaapa » Sat Nov 12, 2016 7:31 pm

It's me, the blogger again. I have done some calculations about relative taxes comparing the US and Finland and find the results surprising. I admit I don't know much about the Finnish tax system but after the first pass at this thing it seems much cheaper to live in Finland than in Massachusetts. I'm sure a lot of you won't agree and will help educate me on the Finnish system. Please read my post at http://www.retireinfinland.com. Be forewarned: Lots of numbers!

Finnish Taxes

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Flossy1978
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Re: Finnish Taxes

Post by Flossy1978 » Sat Nov 12, 2016 11:57 pm

I read your post.

Other stuff in America is much cheaper. Food, cars - running of cars, clothing, most housing, etc. In America you also have a lot more choice in regard to everything. Financially speaking as well. In America many incomes are much higher for the same job as in Finland, and yet your income taxes for higher paid jobs are still less than in Finland. Americans, like Australians, also have more desposable income than people in Finland have.

Resources are limited in Finland. They don't appear to be in America. Only by the means to pay for them are you limited in America.

You might think the healthcare in Finland offers you much more than in America for the amount each country pays, but in America you again get more choice and your Doctors have to and generally will listen and help more. Afterall, you are the customer and they rake in the big bucks. In Finland, if you go through the public system, you are at its mercy. And you almost always end up in the public system, in the end. From all I've read between Finland and America, the standard of care (if you can pay for it in America) overall is much better than Finland.

I dated a Finnish doctor (who was also a specialist on top of being a basic doctor). They have much more power than the patient, customer. The stories he told me.

From stories I've read about birthing and experienced in Finland myself..... Yes, Finland is excellent at this but you are limited with choice. You can't demand a c-section because it is what you want, like in America. If there is a mental/emotional issue with giving birth naturally, you need to seek mental health help, who will then decide if can have a c-section. Physical inability to give birth naturally is different. You can't and the doctor won't set a pre-determined date you'll give birth, unless you are overdue. Maybe if there is a physical reason they do. Giving birth is a much more natural thing here. In America it seems to considered a medical condition.

My Finnish friend had twins. She went to 38 weeks. Gave birth to two roughly 4kg babies - naturally. That would very rarely happen in America. The picture I get about multiples there is, it's so high risk. Got to get the babies out early. Got to have a c-section etc. So much unnecessary medical intervention.

My Finnish friend has a form of blood cancer. I can't remember which anymore. He's had some chemo, in pill form. But first he had to wait almost a year for his numbers to get "bad" enough to even get the once a day chemo pill. He lives on a rollercoaster. On the chemo pill, off it. At the mercy of his doctor. In America you are straight away blasted with intervention and medicine to fight cancer as aggressively as possible till the end, when the chemo either kills you or there really is nothing left. I've seen the documentaries of people on their deathbeds in America and they are still being offered treatments. Wouldn't happen in Finland. Especially if you are old.

I don't think you can compare the two countries with regard to healthcare. The doctors in Finland make !"#¤% wages. The doctor I dated, before taxes made about 65,000 euros a year (this was about 5-6 years ago) and paid heaps in taxes. He would do a 24 hour shift once a month to bring up his income. The doctors will all get paid their salaries regardless. So they don't really need to put any effort into their work and you often get the crappiest rudest doctors.

Daycare is cheaper because it is government funded. But again, you get little choice. You apply for a spot, wait your turn and go where you are told to go. In most cases. Some go privately, but it is also Government funded.

Education may be free, but again the choice is limited. In America you get what you pay for.

Any money you get from the Finnish Government which is taxed, is taxed at a much higher rate too.

I don't think America is more expensive as there are so many variables at play.

If your income figures are correct. That 18% is only the basic tax amount. Did the information also add on the other taxes you pay on top of it? I paid about 20% as my basic amount, but adding on the other taxes brought it up to 24.5%. I think you have to add about 5.5% to the basic tax rate to get the true figure.

I do like your blog though. But maybe don't compare the two countries so much. Too many variables in everything except for trashy telly :lol:


AldenG
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Re: Finnish Taxes

Post by AldenG » Sun Nov 13, 2016 2:45 am

In many places in the US, you can still call your doctor at 8:00 AM, get in for an appointment at 11:00 AM, get a misdiagnosis by 11:06, and leave with a prescription for the very newest me-too drug that has no real advantage over its generic predecessors by 11:10, get to the drugstore across the street at 11:14, and pay $100 for a Tier 4 medication you didn't need whose more effective predecessor would have cost only $5 or nothing... by 11:20. Then spend the next six weeks arguing back and forth with your insurance company over whether the visit was covered, what services were provided, whether you have or have not already met your deductible for the year, and whether the medication was pre-approved before you filled the prescription or do you owe another $100 for it.

The US still has the healthcare system that isoften world-ranked #1 in "responsiveness" although only ranking in the teens or twenties on many other measures. The actual experience speaks for itself.

The system in Finland is not as responsive. You might have to wait months for the public system or pay a good deal up front for the private system, and you won't always get the latest medications, though that may actually be a good thing.

However, if you need a high-profile experimental liver transplant from a baboon or some such, you're probably better off at Mass Gen or somewhere in NYC or LA. Finland doesn't do that kind of thing.
As he persisted, I was obliged to tootle him gently at first and then, seeing no improvement, to trumpet him vigorously with my horn.


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Oombongo
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Re: Finnish Taxes

Post by Oombongo » Sun Nov 13, 2016 7:08 am

Let's say, your hard work is rewarded by more taxes here :lol:
and as others said, you don't have much disposable income after paying all them taxes. On top of that, everything is damn expensive and choices of goods here is appalling.
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betelgeuse
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Re: Finnish Taxes

Post by betelgeuse » Sun Nov 13, 2016 4:13 pm

Flossy1978 wrote:If your income figures are correct. That 18% is only the basic tax amount. Did the information also add on the other taxes you pay on top of it? I paid about 20% as my basic amount, but adding on the other taxes brought it up to 24.5%. I think you have to add about 5.5% to the basic tax rate to get the true figure.


For workers there's their part of the pension contribution to add on top. However, this obviously does not apply to pensioners. You do have to pay some for medical fees though.

Chaapa wrote:I admit I don't know much about the Finnish tax system but after the first pass at this thing it seems much cheaper to live in Finland than in Massachusetts. I'm sure a lot of you won't agree and will help educate me on the Finnish system.


Income taxes only account for about 25% of the state revenues. The biggest source of income is VAT.

https://www.veronmaksajat.fi/luvut/tila ... -ja-menot/

I looked at the budget for Hyvinkää and 60% of revenue comes from income taxes.

http://www.hyvinkaa.fi/globalassets/kau ... valmis.pdf

What you need to understand is that income taxation is highly progressive. Most Americans are simply mistaken about the taxation for average earners in Finland. It's only the high income people that pay high rates. 60k highest earners paid 14% of state income taxes in 2011.

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Chaapa
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Re: Finnish Taxes

Post by Chaapa » Sun Nov 13, 2016 4:17 pm

Oombongo wrote:Let's say, your hard work is rewarded by more taxes here :lol:
and as others said, you don't have much disposable income after paying all them taxes. On top of that, everything is damn expensive and choices of goods here is appalling.


What I wrote is actually the opposite. In the US you are actually taxed almost double after you account for all the taxes. Country to country tax comparisons should take into consideration ALL the taxing authorities and often don't. I pay tax to the federal government, state government, local government and social security. Now that I'm required by law to pay for health insurance (which is funded by taxes in other countries) I throw than into the mix. When you add it all up it's almost twice Finnish taxes on the same income.

I'll agree that your choice of goods is not great-- but rapidly improving. You'd be surprised what we pay over here for other essentials. For example: a new apartment building went up near my job in Quincy (no-wheresville) MA. OK. It's commuting distance from Boston. A studio apartment-- what you would call a yksiö is renting for $2000 (1842€) per month. My cell phone bill is over $300 (276€) per month and internet and TV, bundled together are over $200 (184€) per month (So much money and international hockey events are blocked). My salary is a little less than the average in Massachusetts which is about $4300 (3960€) per month. so it's a good thing I have a working husband :D .

What I'm looking for is information about Finnish taxes. Was it correct to use the online calculator the way I did? Are there other significant taxes I overlooked? If so, what are they?


betelgeuse
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Re: Finnish Taxes

Post by betelgeuse » Sun Nov 13, 2016 4:46 pm

Chaapa wrote:What I'm looking for is information about Finnish taxes. Was it correct to use the online calculator the way I did? Are there other significant taxes I overlooked? If so, what are they?


The big picture from the calculator was correct. Most people make 12,5 times the monthly income in a year due to holiday extra (it's part of most collective bargaining agreements). Here's an ok table about about where the taxes are collected from:

https://www.veronmaksajat.fi/luvut/Tila ... n-rakenne/

The pension system is quasi taxation and that's most of what you see in "Pakolliset sos.vak.maksut". We can see that consumption taxes are one third of tax revenues.

Chaapa wrote:My cell phone bill is over $300 (276€) per month and internet and TV, bundled together are over $200 (184€) per month (So much money and international hockey events are blocked). My salary is a little less than the average in Massachusetts which is about $4300 (3960€) per month. so it's a good thing I have a working husband :D .


I find the utility prising great in Finland because there's good competition for most utilities. Which is funny because capitalism works better here in that respect. Even things like electricity production are not tied to a single source. You only need to pay your local company for the transmission but can buy the actual power from anyone you want.


Flossy1978
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Re: Finnish Taxes

Post by Flossy1978 » Sun Nov 13, 2016 6:43 pm

Also, Finland is a tiny country with a decent amount of people in it. It is much cheaper to run the net, electricity, water etc, than much larger countries like America.

I thought the poster was just talking about income taxes, as a normal worker. I must have missed where they wrote about it being the pension.

If it is Government paid pension, I assume like other Government paid monies like maternity leave, you have to pay alot higher taxes? Maternkty Leave payments for instance are highly taxed.


Chaapa
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Re: Finnish Taxes

Post by Chaapa » Sun Nov 13, 2016 8:11 pm

The pension system is quasi taxation and that's most of what you see in "Pakolliset sos.vak.maksut". We can see that consumption taxes are one third of tax revenues.

The US pension system is maybe what you call "quasi-taxation" as most employees pay 6.5% of their income into the system and employers must also pay 6.5%. This is not across the board because some employees are exempt and we have a maximum annual contribution. I included that as a tax in my calculations on the US side.

We also have sales taxes that are levied by state and local governments. It varies by location and is added on to the purchase price of goods added at the point of sale. In Massachusetts it's 6.5% of the purchase price of goods. If I buy an item label $10, I am charged $10.65 at the cash register. I didn't add that to my calculation because it is not directly tied to income, but perhaps I should have.

How do consumption taxes work in Finland? Is it the same as sales tax, paid at the point of sale? Is it included in the price of goods or added later? If it is built into the price of goods then it it unfair to compare the prices of say, a pair of jeans in Finland and the same pair in Massachusetts if the Finnish price includes tax and the Massachusetts price does not.


Chaapa
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Re: Finnish Taxes

Post by Chaapa » Sun Nov 13, 2016 8:20 pm

AldenG wrote:In many places in the US, you can still call your doctor at 8:00 AM, get in for an appointment at 11:00 AM, get a misdiagnosis by 11:06, and leave with a prescription for the very newest me-too drug that has no real advantage over its generic predecessors by 11:10, get to the drugstore across the street at 11:14, and pay $100 for a Tier 4 medication you didn't need whose more effective predecessor would have cost only $5 or nothing... by 11:20. Then spend the next six weeks arguing back and forth with your insurance company over whether the visit was covered, what services were provided, whether you have or have not already met your deductible for the year, and whether the medication was pre-approved before you filled the prescription or do you owe another $100 for it.


Gee. Looks like you "get it". All this presupposes that you can find a primary care physician who accepts your insurance. :lol:

(Sorry. Couldn't help myself. I'm not here for America-bashing).


betelgeuse
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Re: Finnish Taxes

Post by betelgeuse » Sun Nov 13, 2016 8:42 pm

Flossy1978 wrote:Also, Finland is a tiny country with a decent amount of people in it. It is much cheaper to run the net, electricity, water etc, than much larger countries like America.


United states has a higher population density than Finland. I see no basis for your argument.

https://en.wikipedia.org/wiki/List_of_c ... on_density

Flossy1978 wrote:If it is Government paid pension, I assume like other Government paid monies like maternity leave, you have to pay alot higher taxes? Maternkty Leave payments for instance are highly taxed.


They are taxed with higher rates because you will not get the same deductions. However, it's not wildly different.

Chaapa wrote:The US pension system is maybe what you call "quasi-taxation" as most employees pay 6.5% of their income into the system and employers must also pay 6.5%. This is not across the board because some employees are exempt and we have a maximum annual contribution. I included that as a tax in my calculations on the US side.


The pension contributions in sosiaalivakuutusmaksut have the same function as the 401(k) and IRA systems in the US that is to finance earnings related pensions (however keep in mind the differences between defined contribution and defined benefit systems). National pension (the pension that you get from state when earnings related pensions is low) is financed from regular tax revenues like income taxes. We do not have a direct tax equivalent to the Social Security Tax that you reference.

Chaapa wrote:How do consumption taxes work in Finland? Is it the same as sales tax, paid at the point of sale? Is it included in the price of goods or added later? If it is built into the price of goods then it it unfair to compare the prices of say, a pair of jeans in Finland and the same pair in Massachusetts if the Finnish price includes tax and the Massachusetts price does not.


It's included in the sticker prices and paid to the government by the seller. Indeed when comparing to US prices you need to compare the after tax price.


Rip
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Re: Finnish Taxes

Post by Rip » Mon Nov 14, 2016 5:14 am

betelgeuse wrote:For workers there's their part of the pension contribution to add on top. However, this obviously does not apply to pensioners. You do have to pay some for medical fees though.


For comparisons for employed persons, in addition to nominal taxes currently I (and I think all wage earners, there used to be more variations between different sub systems) pay 6.85% of my gross salary as other mandatory tax like fees: 5.7% as a pension related fee and 1.15% unemployment insurance fee. Neither applies to persons that have retired.

Note: If one would want to make full comparison of taxation/social security/pension payments you would need to consider also the substantial fess paid by the employer - but as these are already paid before an employee sees even his gross salary in the payslip, they don't change the difference between gross and net salaries (and are of not relevant for retirees).

You used Hyvinkää in you example. If you had your own house there you'd be expected to pay some kind of three digit figure (it would have to be a rather fancy house for four digits) as an annual real estate tax. The system is rather complex, you can get some quotes for sale advertisements with Google keywords 'Hyvinkää' and 'kiinteistövero'.


Rosamunda
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Re: Finnish Taxes

Post by Rosamunda » Mon Nov 14, 2016 10:55 am

Sales tax is called ALV in Finland and, yes, the tax is included in the price advertised for retail purchases (not always for B2B sales, but that would be made obvious).

The standard rate of ALV is 24%
The lower rate (food, restaurants) is 14%
A reduced rate of 10% is applied to books and pharmaceuticals.
A zero-rate exists for medical services, banking fees and a few other things

https://en.wikipedia.org/wiki/Taxation_in_Finland (seems to be fairly up to date)
https://www.vero.fi/en-US/Precise_infor ... 2013(27098)

Once you are domiciled (fiscally) in Finland you will be liable for VAT on anything you purchase online from the USA. Also, you will not be able to buy anything 'tax-free' within the EU. However, I guess you would be able to buy tax-free goods while you are in the USA and then bring them with you into Finland tax free.

Remember that there is little point importing white goods into Finland (won't work here without adapters etc and are probably too big for the average Finnish house/apartment) so you might have to spend money on equipping your new home (though big kitchen equipment (fridge, dishwasher) is usually left in situ when you buy or rent a home). Anything´with a plug falls into this category so you would have to check all your appliances. You might find furniture is a problem too. A super-king- sized bed is unlikely to fit in the standard Finnish bedroom. When you start to add all that up, you'll soon find you are paying a hefty amount of ALV into the system.


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Pursuivant
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Re: Finnish Taxes

Post by Pursuivant » Mon Nov 14, 2016 11:43 am

How do consumption taxes work in Finland? Is it the same as sales tax, paid at the point of sale? Is it included in the price of goods or added later? If it is built into the price of goods then it it unfair to compare the prices of say, a pair of jeans in Finland and the same pair in Massachusetts if the Finnish price includes tax and the Massachusetts price does not.


So what's a pair of Levi 501's then cost in taxachusetts? $ 30?? And what is the sales tax on clothing? Some zilch on top?
In Finland the prices are obviously VAT included, as its now at 24%. But it still doesn't explain even with the VAT why that pair of Levi's costs $90 in Finland.

As Rosamunda elaborated on the VAT and the variable rates, there's also other taxes that get charged before the VAT (that's calculated at the point-of-sales). There are special "product taxes" on stuff say cigarrettes, alcohol, sugary sweets, cars and whatnot, that jack up the price. And then you get the 24% on top, tax on tax.
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PJG
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Re: Finnish Taxes

Post by PJG » Tue Nov 15, 2016 1:40 am

You'll pay US$ 5.60 or thereabouts for a gallon of regular unleaded. Most of the difference is in taxes. I don't know if that's something you'd be concerned about, but considering the average mileage here is much higher than some other parts of Europe and certainly much higher than for many Americans (based on discussions with Texan and Oregon resident colleagues), I'll mention it anyway.

Annual car taxes range from about Eur 200 upwards of a grand, depending on vehicle choice. If you go diesel, you'll pay a lot more for passenger cars.

VAT rate at 24%, already mentioned, will be applied on top of EU import duties, which vary depending on the goods in question. All additional taxes compared with US purchase prices.

You should also look into the differences in inheritance taxes compared with Massachusetts, as the tax free allowances will undoubtedly be lower here and you don't get to pick and choose where they're payable if you're domiciled here. Sorry to bring it up, but it's a big deal and it's something everyone will face one day. I understand your 'home' state there allows for US$ 2,000,000 exemption, whereas here in Finland, you'll be taxed on anything over Eur 20,000. More here: https://www.vero.fi/en-US/Individuals/Inheritance

Likewise, if you have any investments, savings or bonds which will generate a net income, they're all taxable. Same goes for any other types of capital gains, in Finland or overseas. This even extends to any rental incomes from US properties, should you decide to rent your home when you move here. It's all income, it's all taxable.

Best consult with a tax advisor here to really get a good understanding of the figures and to play out a few simulations to understand how you'll manage in different scenarios.

Best of luck!


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