Why does the price of gasoline increase with a VAT increase? Purra answers – 2024-04-17 08:29:25

The government decided on adjustments of around three billion euros in a budget scramble, about half of which will be implemented through tax increases and half through cuts.

Prime minister Petteri Orpo (kok) emphasized at the press conference that the government understands people’s grief with the decisions.

– I firmly believe that if we do these things now, things will be better for Finns and Finland in the longer term, Orpo said.

Orpo was asked why the ratio of cuts and tax extortions was about half and half, when earlier it was estimated that tax extortions would be one third of the adjustment amount. Orpo emphasized that the government has done the majority of its adjustment measures with spending cuts.

– Now that we went to get additional surgeries, we are at the bottom of the ladder. If we had continued on the path of spending cuts, we would have gone even deeper into a welfare society. The increase in the general VAT rate was considered to be the least harmful, Orpo said.

The government decided that the general value added tax rate will rise from the current 24 percent to 25.5 percent.

“No restrictions were made”

The Treasury minister Riikka Purra (ps) justified the increase in the general VAT rate by saying that the government had little other options in this situation.

– When we don’t want to allocate significant measures to work and entrepreneurship, the alternative remains value added tax, says Purra.

Purra emphasized that stabilizing the debt ratio is the government’s number one goal.

Purra was asked at the press conference what he would say to his voters about the fact that the increase in the general value added tax rate will increase the price of gasoline by approximately the same amount as the decrease in the fuel tax.

– When the general value added tax rate is increased, it applies very widely to the products and services that are consumed in this society, and no restrictions have been made there, Purra answered.

Chairman of the Christian Democrats, Minister of Agriculture and Forestry Sari Essayah emphasized that the government will not implement the food VAT increase.

– Additional income is sought from health taxes to cover the costs of services and the reduction of expenses as people’s health improves, Essayah said.

The government outlined, among other things, that it would increase the VAT rate on sweets and chocolate from 14% to 25.5% and tighten the taxation of spirits.

Ministers Sari Essayah, Riikka Purra, Petteri Orpo and Anna-Maja Henriksson told about the lines of the campaign on Tuesday. Henri Kärkkäinen

Tax extortion for pensions

Purra said at the press conference that the VAT increases should come into force already this year, so that the deficit could be pushed down sufficiently for this year as well.

According to Purra, sufficiently low means 3.5 percent of GDP for this year.

Purra said that next year’s deficit will be less than three percent of GDP thanks to the government’s actions, which means that Finland will avoid the EU’s excessive deficit procedure, i.e. the so-called observation category.

According to Orpo, without further measures, the debt of the public finances would approach 90 percent in relation to BTK in 2028.

Henriksson: Can’t afford this level of service

The government also outlined that the tightening of pension income taxation will target those receiving a pension of 23,000–57,000 euros per year. Purra emphasized that the government wanted to avoid measures aimed at low-income pensioners.

Orpo said that the effect of the measure is about 100 euros per year for someone receiving a 30,000 euro pension.

Chairman of RKP, Minister of Education Anna-Maja Henriksson justified the government’s actions with the fact that the public sector in Finland has grown too large.

– We are used to a level of service that we cannot afford, Henriksson said. According to him, the actions will affect everyone in some way.

Henriksson emphasized that the government will implement the investments of 200 million euros in basic education. However, funding for vocational education will decrease by 100 million euros next year.

Iltalehti followed the twists and turns of the press conference in live text format.