Tuesday, 3 June 2008

Labour Tax Too High and Property Tax Too Low

"Taxes on labour are too high and those on property too low.

Although labour remains less mobile than capital, globalisation has facilitated the mobility of jobs and labour.

The tax burden on labour is relatively high, particularly for upper-income earners, and there are concerns that by pushing up labour costs, the high tax wedge may be an important factor in production-location and off-shoring decisions.

The tax burden on labour should be lowered with priority being given to lowering the top marginal tax rate on labour to keep and attract highly skilled jobs and to reduce incentives for income reclassification.

On the other hand, immobile factors such as immovable property are taxed lightly and there is considerable scope for increasing the taxation of property and land.

This makes sense not only from a globalisation perspective (given that immovable property is an immobile tax base) but also because property taxes are progressive, and hence may help to substitute for a reduction in labour taxation of the top income earners
. "

This message is from the OECD, and is indirectly targeted to Jan "incompetent" Vaapavuori. Indeed, He was warned about distortions that will cause to the housing market already back in 2003. Now, 5 years has gone and nothing much has been done.

In the light of the recent corruption scandal, that might shed light on why the government is dragging his feet on such reforms. At the end, many big business lobbyers have been sitting on land, and cashed vast some of money hence played the role of prime speculators.

1 comment:

Anton said...

Since it looks like most of the Finnish politicians are corrupt and most probably own already their own house, other residential investment and land, you will surely see no move on that level.

-Land tax and property tax will stay low thanks to corrupt MPs

-Oil subsidies will increase as most Mps own SUV

-Residential tax subsidies will not be phase out as most MP save tax money on that