Government line on measures supporting the Competitiveness Pact

The Government supports the achievement of a negotiated outcome by the central labour market organisations concerning the Competitiveness Pact. Negotiations on collective agreements for employees and public servants in connection with the Competitiveness Pact are still in progress

In the Government's view the Competitiveness Pact is important for economic growth and employment in Finland. The Government hopes that the agreement will achieve as extensive a coverage as possible and that it will be put into effect. The decision is in the hands of the social partners.

The Government has made an assessment of the impact of the Competitiveness Pact on the country's employment, growth and public finances. This assessment is subject to the eventual coverage of the agreement. The Government will also take into account the degree of harmony achieved by the central labour market organisations in regard to the so-called Finnish wage model, and the progress with company-level agreements in sectors where a negotiated outcome is achieved under the Competitiveness Pact.

If the Competitiveness Pact achieves sufficient coverage and is put into effect, the Government will be ready to support the outcome through the following measures:

1. The Government will not proceed with a government proposal for measures to strengthen cost-competitiveness.

2. The Government will not implement the conditional list of additional savings and tax increases set out in Annex 2 of the Government Programme.

3. The Government will introduce tax concessions on earned income in all income categories relative to the increased charges set out in the Competitiveness Pact, under the following conditions:

• If the Competitiveness Pact achieves sufficient coverage and is put into effect, the Government will introduce tax concessions on earned income amounting to EUR 315 million in the 2017 Budget. The Ministry of Finance estimates that this would be sufficient to compensate for the 2017 impact on taxpayers of the increase in charges agreed in the Competitiveness Pact.
• If the coverage of the Competitiveness Pact is greater than 85 per cent, the amount of the tax concessions will be increased by EUR 100 million, to a total of EUR 415 million.
• If the coverage of the Competitiveness Pact is greater than 90 per cent, the amount of the tax concessions will be increased by a further EUR 100 million, to a total of EUR 515 million.

4. Regarding taxation in 2018 and 2019, the Government will endeavour, under its programme, to ensure that taxation of wage and salary earners is not increased in any earnings category. When reviewing tax decisions for these two years, the Government will also take into favourable consideration the following:

• whether sectors opting to remain outside the Competitiveness Pact at this stage decide to agree on labour market solutions that accord with the Competitiveness Pact;
• whether the solutions determined during the approval of the comprehensive collective settlement at sectoral level, which will begin in autumn 2017, will strengthen Finland's employment and competitiveness.

The tax concessions connected with the labour market solutions would therefore collectively, during the parliamentary term, reach a level close to the billion euros set as the goal.

In all the decisions it makes, the Government will take into account the economic policy objectives of the Government Programme and the deficit and debt criteria set by the European Union.

Inquiries: Markus Lahtinen, Special Adviser to the Prime Minister (Economic Affairs), tel. +358 295 160 404, Juha Halttunen, Special Adviser to the Minister of Justice and Employment, tel. +358 50 574 0236 and Laura Åvall, ​ Special Adviser to the Minister of Finance (Economic Affairs), tel. +358 50 361 7511