Purchasing Power of People

[Työelämä]

I hear talks then and around that new Recession is looming around, but with:
40% Income Tax
6% Provident Fund
2% Unemployment Fund
~1% Development and Miscellenious expenses (all are approx.)

the purchasing power of people is just about half of their gross income. On the other hand there might be direct/indirect benefits from Government but does this suggests high tax rate is fueling the recession ? Since, the purchasing power is decreased, people reserve money to spend only on most important things, business doesn't run well when customers hesitate to spend, that links with lost jobs, and more load on government and unemployment fund to pay for living of jobholders who lost their jobs, that may end up with low collection of tax as people are jobless, so, hike in tax percentage again to cover the cost, something in between leads to hike in prices of food, commodities, rent, fuel, etc. and again recession...

I'm not economist, but it sounds simple, low tax rate = more purchasing power, more happy peppy and jolly faces everywhere !!!

I agree with you, and was just discussing similar issues about the recession with my friends and we all came to a conclusion that peoples purchasing power has declined a lot as a result of high income taxes and jobless rates, this has in turn affected businesses and also keep strengthning the recession to stay longer, while world leaders keep blaming it on one Tom,Dick and Harry all over the economic spheres.

[Karhunkoski]

I hear talks then and around that new Recession is looming around, but with:
40% Income Tax
6% Provident Fund
2% Unemployment Fund
~1% Development and Miscellenious expenses (all are approx.)

Um, where did you get the "40% income tax" from?

Since, the purchasing power is decreased, people reserve money to spend only on most important things, business doesn't run well when customers hesitate to spend, that links with lost jobs, and more load on government and unemployment fund to pay for living of jobholders who lost their jobs, that may end up with low collection of tax as people are jobless, so, hike in tax percentage again to cover the cost, something in between leads to hike in prices of food, commodities, rent, fuel, etc. and again recession...

I'm not economist, but it sounds simple, low tax rate = more purchasing power, more happy peppy and jolly faces everywhere !!!

You're correct that increasing tax doesn't encourage domestic spending. However the only other option is to drastically cut spending, and that would hit many people hard. Not only people who rely on unemployment benefits, but employed people too (imagine your subsidised daycare jumping from a couple of hundred € a month, up to several hundred €/month, imagine even less police, imagine even longer queues in public sector buildings, even worse healthcare, etc, etc). The system is already being stretched, further spending cuts could cause total collapse in some areas. Is that what you want????

[Upphew]

Um, where did you get the "40% income tax" from?

its approx figure, but tax in Finland is somewhere near that.

Yeah... if you earn approximately 5k to 8k in month:
http://www.veronmaksajat.fi/fi-FI/tutki ... uffix=Text

[Karhunkoski]

Um, where did you get the "40% income tax" from?

I don't get income tax, I pay it Kiddin !!!
its approx figure, but tax in Finland is somewhere near that.

Not for the average person it isn't. You've simply plucked a figure out of the air and tried to build a case on top of it.

imagine even less police, imagine even longer queues in public sector buildings, even worse healthcare, etc, etc). The system is already being stretched, further spending cuts could cause total collapse in some areas. Is that what you want????

cutting the government expenses should not be deemed as balancing factor, I'd suggest more investment ..snip..

But which part of thin air do you plan to pluck this ivestement revenue from?

It's correct that increased taxation works against itself, and doesn't stimulate employment or growth. But when there are increasingly large bills to be paid now, there government needs to balance it's books somehow.

You said earlier that you're not an economist and that "it all sounds so simple". Are you somehow suggesting that you (a self-admitted non-economist), has managed to magically discover a previously unknown solution to one of the largest economic problems? No, of course not.

[Rosamunda]

Finland's total tax revenues are about 42% of GDP, so maybe that's where the 40% comes from.... but that is from all souces (including capital tax, company tax, VAT etc). The other Nordics, also France, Italy and Austria (the other AAA country), all collect more than Finland.

Due to higher tax if big companies start to elope

Not exactly sure what you mean by this but just for info, company tax was reduced from 26% to 24,5% this year.

The tax burden on Finnish citizens is less than many other European countries (the chart is out of date but I don't think income taxes have been decreased in any European country since 2005...). In fact, in many they have been very substantially increased (eg Greece!)

[Työelämä]

Hmmm, income tax i have only paid it in Finland, never payed it in my country or even the middle east where i used to work , cos it is a tax free zone.

[Rip]

Taxes maybe high, but they were so also when the economy was booming. You can hardly say that the strongest European economies are those with lowest taxes.The part of the public expenditure that does not go in to servicing older (foreign owned) debt or development aid is spent overwhelmingly to buy goods and services consumed here, so that money gods back to the economy.

Where would you'd want to take the money for a tax cut ? Borrow it or from those getting their salaries from public funding?

[Rosamunda]

... all I remembered was my ex-boss murmuring about the reduction of tax deductions in service sector (I'm still not sure about what kind of tax deductions he was talking about)....

He might've been referring to the tax deductions on home improvements and other domestic services. It used to be possible to deduct cleaning, gardening, decorating, building services (at least the labour part) from your personal tax liability. This facility still exists but has been substantially reduced.

IMO this was a monumental idiocy on the part of the coalition govt since these tax breaks created plenty of service sector jobs and incremental VAT revenue. Now people either get the work done on the grey market or they wait... or they do it themselves. None of which really help the economy. eg We were about to switch our oil heating over to a ground heat pump but have now decided to wait.

[Työelämä]

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Hmmm, income tax i have only paid it in Finland, never payed it in my country or even the middle east where i used to work , cos it is a tax free zone.

Bloody tax havens.... would love to go there (not middle east though, its damn hot there).... any link you'd suggest to apply for job there ?

Some of the sites i can think of; www.gulfjobsites.com/jobs , www.naukrigulf.com , www.bayt.com, just throw your c.v in them who knows you may be lucky and start living a tax free life soon!