Finland: Selected Issues
IMF Staff Country Reports, January 16, 2020
Source details
- Canonical URL
- Finland: Selected Issues
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Bibliographic details
- Published: January 16, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513526232.002
Summary findings
- Investigates impact of promoting labor supply through tax and benefit reform in Finland.
- A comprehensive reform of the tax-benefit system could support the government’s objective of increasing employment.
- The equity-efficiency trade-off of the proposed reform scenarios improves social welfare when using Finland-specific preferences.
- The Finnish tax and benefit system has served the country well, having supported high income levels alongside low inequality.
- The model is characterized by strong institutions, high taxes and public service provision, a highly skilled labor force and a generous social safety net.
- Even for revenue-neutral reforms, economic gains in terms of labor supply and earnings could be substantial.
- The reform proposals consider Finland’s strong preferences for equity, while seeking to correct potential inconsistencies in how the tax burden is distributed.
Microsimulation analysis
- Uses microsimulation to analyze tax and benefit system adjustments.
- Shows that, despite strong redistribution and high-income levels, Finland could improve its tax and benefit system.
- Quantifies potential economic gains in labor supply and household earnings under reform scenarios.
Policy recommendations and reform proposals
- Proposes comprehensive tax-benefit reform designed to raise employment while respecting equity preferences.
- Seeks to correct potential inconsistencies in how the tax burden is distributed.
- Emphasizes revenue-neutral reform options that can still yield substantial economic gains in labor supply and earnings.
Subject and keywords
- Subject: Income, Income inequality, Labor, Labor supply, Marginal effective tax rate, National accounts, Tax policy, Wages
- Keywords: CR, earnings distribution, earnings increase, economic gain, employment gain, household earnings, Income, Income inequality, income level, ISCR, Labor supply, Marginal effective tax rate, participation tax rate decomposition, rate, rate cut, supply, tax rate, tax rates comparison, Wages, work benefit
Content in this bundle
- Finland: Selected Issues; IMF Country Report No. 20/6; December 16, 2019