Neuvottelija.AI

EP176 · Economy · first published 2023-02-20

Sinking Finland into the Bermuda Triangle | Petri Roininen | Neuvottelija 176

Petri Roininen, chair of the Finnish party Korjausliike, draws Finland's situation as a Bermuda Triangle whose corners are one of the world's highest total tax rates, a decade and a half of zero growth, and households among Western Europe's least wealthy. He proposes balancing public finances immediately rather than over two parliamentary terms, and as means, flattening tax progression, a privatisation programme and extending a single dividend tax rate to all owners. The discussion opens up the entrepreneur's five-tax wedge and how construction taxation creates the need for housing benefit. Published 19 February 2023.

Sami Miettinen · Sections: AI and the Economy + AI and Society

Sinking Finland into the Bermuda Triangle | Petri Roininen

Summary: In episode 176 of the Neuvottelija channel, Sami Miettinen interviews Petri Roininen, chair of the Finnish party Korjausliike (“the Corrective Movement”), for the third time, now ahead of the spring 2023 parliamentary election. The episode is openly partisan and the assessments are the guest’s own views. Published 19 February 2023.

A listed-company CEO and a party leader

Roininen opens with a combination he says was confirmed to him the previous day: he is apparently the first CEO of a listed company in Finnish history to chair a political party at the same time. Miettinen offers his own counterpart — the first investment banker in Finland with his own YouTube channel — and both land on the same advice: throwing yourself in is worth it, and you are not punished for it.

The party’s history is covered briefly: Korjausliike is the former Blue Reform, a party some six years old that spent two years in government at the end of the Sipilä cabinet and whose party board includes former MPs, ministers and special advisers. Roininen was elected chair in September 2021, and since then, he says, first the policy and then the name were corrected to match.

The electoral setup: he stands in the Helsinki constituency, and the party has an electoral alliance with the Christian Democrats and the Centre Party, from which it aims for two parliamentary seats.

On polls he offers one methodological caveat, to be read as what it is — a party leader’s interpretation of his own support: “The problem with polls is that they in effect pre-select who is asked. And then half the parties are missing from those surveys.”

The Bermuda Triangle

The episode’s title concept arises from Miettinen’s frustration with media coverage. He notes that the head of the pension insurer Keva was given space in Helsingin Sanomat to say taxes have quietly declined over time — and Roininen sketches the arc of that weekend’s coverage: first a piece on how the total tax rate has imperceptibly eased, and the next day an editorial saying this is hardly the time for tax cuts. “That is effective shaping of opinion.”

As a counter-image he draws a Bermuda Triangle whose three corners are:

  1. A total tax rate among the world’s highest. Finland, he says, taxes more heavily than 98 per cent of the world.
  2. Roughly fifteen years of zero economic growth, which he claims is closely related to the first corner.
  3. Households among Western Europe’s least wealthy, which follow from the first two.

“The money sinks here, and eventually we sink here too, unless we fix it. Korjausliike’s mission is to set this spiral turning the other way.”

Miettinen adds his own arithmetic to the triangle, which Roininen accepts gratefully: if a deficit of roughly three per cent of GDP is added to a 43 per cent tax rate, Finland reaches Denmark’s level at 46 per cent — because borrowing is future, discounted taxation. “We are in fact number one in the world: a hundred per cent tax less than we do.”

Progression, not sprinkling

On tax specifics Roininen offers one figure that carries the whole argument: at a monthly salary under four thousand euros, more than half of any additional earnings goes in tax.

“Of course that is a negative incentive to work harder, better or more.”

The party’s proposal is therefore targeted rather than general: a billion euros of relief on earned income tax, directed specifically at pushing the progression curve down. “Not sprinkling it here and there — the problem is the progression, which cuts into rising incomes too fast and too hard.”

Miettinen’s refinement concerns international comparison: even Finland’s highest salaries are not internationally impressive, and Central European pay is partly better for precisely this reason. Roininen compresses it into a sentence: “in many professions gross pay is fine, but net pay is nowhere near.”

He also mentions having dug out the fact that Finland has the world’s second highest marginal tax rate for high earners, close to sixty per cent — with Belgium the surprise leader, though deductions take it comfortably below Finland.

The capital tax myth

Miettinen recalls a claim from the previous campaign, that Finland’s capital tax yield relative to GDP is among the world’s smallest — with the implication that the cause is a low rate.

Roininen’s correction is direct and is the episode’s sharpest single rebuttal:

“It means we accrue no capital income, because we have no capital. Not that our capital tax rate is low.”

From there he moves to an asymmetry he would remove: in dividend taxation of listed companies a large investor, institution, foundation or trade union receives dividends tax-free, while a million Finnish private savers pay 30, in a sense even 34 per cent.

Korjausliike proposes the same rate for everyone, and according to the Finnish Shareholders’ Association a uniform rate would settle at around five per cent. “Same source, same form of income, same for everyone.” The effect, he argues, would be that people grow wealthier — not institutions.

The unions, the wage round and an outsourced mandate

Miettinen connects institutional ownership to his previous episode: Harri Saukkomaa quoted the union leader Riku Aalto as saying nobody negotiates with the broke — and when the union movement has accumulated billions tax-free, it can also strike.

Roininen declines to personalise it: “This is not about what Riku Aalto knows.” He notes Aalto had a hard winter, negotiating not only his own sectors’ pay but the public sector’s alongside.

The structural criticism is sharp, though, and it is the episode’s clearest point about negotiation:

“It is an astonishing structure: from the municipal employer’s point of view, you first outsource the negotiating mandate to someone else. And then when he negotiates, you say how expensive it turned out.”

He offers the municipal employer no sympathy — “they put their names on that paper” — and notes that ultimately the mandate over the public sector’s pay settlement lies with the prime minister, since the money comes from the government’s budget. Miettinen adds his own sharpening: the public sector delegated the negotiation to the private side and then added 5.1 per cent on top in advance.

The episode’s best joke comes from a flip chart: “somebody said that flip chart is the world’s most expensive painting — dearer than the Mona Lisa, valued at a billion; this one is 40 billion.”

Balance now, not in two terms

The core economic demand concerns timing. The party’s alternative budget for 2023 brings public finances into balance — not by fiddling about for two parliamentary terms.

“Why on earth, when it can be done faster and it is a critical question for Finland.”

His assessment of the sitting government’s legacy has two levels: on top of 40 billion in debt, the seeds have been sown for a couple of generations’ spending that successor governments will have to unpick. The next government therefore faces an extremely hard task, and what is needed is a cabinet experienced in identifying and solving economic problems.

The party’s own aim is explicit: “Our wet dream is to reach the position of kingmaker and be able to slot a proper bourgeois government into place.”

And he calibrates the scale internationally — the episode’s most useful frame: Korjausliike aims at a tax rate of 34 per cent instead of 43, which is the ordinary OECD average. The difference is 20 billion a year.

The alternative budget: cuts, investments and privatisation

Roininen begins with an observation about a change in mood, and it is the episode’s most interesting forecast: awareness that something really must be done about public spending has broadened enormously over the past year — in the same way opinion on NATO changed in 2022, first among citizens and then among politicians.

The alternative budget has three parts, and it is not, he says, a cuts budget:

“Our alternative budget cuts costs here and creates growth there at the same time. That is how it is done in companies too.”

Miettinen proposes a symbolic move: where the 2019 coalition talks had “there is money” on the flip chart, in 2023 the wealth comparison would be taped to the wall, saying there is no money here. Both say they share the Credit Suisse wealth comparison repeatedly and gain new followers each time — “it works, and it is true.”

Joint taxation for families

Roininen’s own initiative is an option to move to joint taxation for families, on the ground that the household is the natural economic unit. Separate taxation, he argues, taxes the unit unreasonably when one partner earns much and the other little. Finland moved to individual taxation in the mid-1970s; Germany offers such an option.

Miettinen’s objection is liberal and he marks it as such: the model can lead to investing only in one partner’s career — and in divorce or retirement the poorer partner falls back on state support. Roininen concedes the solution is not problem-free but stresses it would be an option, not an obligation.

The entrepreneur’s five-tax wedge

The episode’s most concrete piece of economic analysis is Roininen’s account of what an entrepreneur’s taxation is made of. He calls it the five-tax wedge:

  1. VAT on money received from the customer.
  2. Earned income tax on the salary paid to oneself.
  3. Pension and other side costs (the self-employed or employee pension contribution).
  4. Corporate tax.
  5. Capital income tax on what remains.

“These five tax items may take two thirds of the euro received from the customer. And with the remaining third you are supposed to run the firm, cover its costs and have something left for yourself.”

His conclusion answers a question he says is asked repeatedly in Finland: why are there not enough growth-minded companies and why does the economy not grow — “because we have ourselves created a five-tax wedge that prevents it.”

Construction taxation creates the housing benefit

The second concrete chain concerns housing, and structurally it is the same spiral.

His figure comes from the construction industry federation’s research: 46 per cent of the cost of building a new apartment block consists of various taxes — VAT being the largest, but far from the only one.

From that follows a wheel spinning the wrong way: when housing production is taxed so heavily, subsidies are needed — 2 to 3 billion a year is paid in housing benefit. The correction, in his view, is the reverse: push taxation down and lower the subsidies.

Miettinen attaches his own irritation that the economics profession hankers after the return of wealth taxes via imputed rental income and thinks of everything collectively through the state. Roininen’s reply contains the episode’s most methodological warning, and it concerns a whole profession:

“All credit to learned people, but one must remember that a very large share of economists are lobbyists. They work for interest groups. Advocacy statements are issued from behind an economist’s objective-sounding figure — they should be heard against that background.”

His own general principle is compact: resources allocated to the state are primarily taken from you, and only secondarily does something come back.

Bloc politics from a democratic standpoint

On bloc-based elections Roininen gives a surprisingly favourable assessment, and the reasoning is procedural rather than partisan:

“There is a certain sense in bloc elections from the voter’s point of view: you are told in advance what kind of government is being built. If we go in with the lanterns dimmed, then coalition talks as an intervening factor between the people’s vote and the formation of a government are decisive. That weakens democracy.”

Of the party field’s movements he offers a reading favourable to his own party: with the Social Democrats moving to the left of the Left Alliance and the National Coalition all but centre-left, space opens on the right. He judges that the Movement Now party, the Christian Democrats, the Swedish People’s Party and the liberals are also drifting towards the economic right, and that the National Coalition’s right-wing credentials are “in the class of a billion in spending adjustment, which is rather pathetic” — though at least it now says so earlier than before.

And he marks a general change: talking about cuts has become permissible. “A couple of months ago people were still laughing at some wetland cultivation scheme.” It has become a genuine topic, and he says he is glad to raise others’ proposals — the liberals’, for instance — because they provoke discussion.

On values he places his party clearly: security (a NATO stance and a substantial funding increase for the police), family values, and a wariness of “very far-reaching intersectional green feminism” — “on the traditional four-field, our home ground is the upper right corner.”

Universal applicability and work detaching from place

On the labour market Roininen’s claim is empirical: a large share of working life in fact runs on rules other than those we read the unions agreeing. In the startup world nobody discusses collective agreements — “they do the work out of passion, they dream of succeeding big.”

His proposal is dismantling the universal applicability of collective agreements and centralised deals and moving to workplace-level bargaining. He notes himself that he does not mean there should be nothing.

Miettinen gives universal applicability a conceptual frame: it is negative freedom — it restricts others’ right to make decisions — and since in many sectors union density is comfortably below 50 per cent, this amounts to a tyranny of the minority. Both also note that since Finland has no constitutional court, a law that has once passed is devilishly hard to remove.

Roininen’s picture of the future is the episode’s most far-sighted passage, and it concerns the mobility of work: remote work, the platform economy and globalisation are detaching work from place. His example is bookkeeping:

“Just as someone outsources the work to a sofa at home as remote work, they can outsource it to Malaga on cheaper terms. Bits and numbers move through the wires, and the work gets done.”

The analogy is to financial markets: as the movement of money was liberalised globally, the movement of work performance is next. And for this Finland is, in his view, badly prepared: rigid labour market structures and heavy taxation make it uncompetitive for employer and employee alike, because too little is left in the employee’s hand.

For the union movement he offers a positive role: a modern guild of professionals, creating rules for this new world of work.

Self-employed pensions and the shadow of discretionary taxation

The last topic is the reform of the self-employed pension contribution, which Miettinen regards as among the term’s riskiest and which in his view will not be solved by forced increases. It concerns some 100,000 sole traders, whom the current system, he says, condemns to very low pensions.

Roininen breaks the problem into two parts, and the first is the episode’s weightiest legal-historical point:

He names two remedies, with Miettinen’s proposal first: a move to individual funding on the London model, letting the entrepreneur calculate the system’s efficiency. The second is paying on actual rather than assessed income. A third possibility he mentions is merging the self-employed scheme into the employee pension funds — and he anticipates the objection: “we earned this; what are you beggars doing on our patch.”

As background he recalls that the whole pension system is defined-benefit, not a contribution-based fund. Miettinen adds the funding ratios: about a third of the employee scheme is funded, while the self-employed scheme’s funding ratio is negative and the difference is paid from the state budget.

And both close on the same point about employer contributions: the employee pension contribution is a tax under another name, and it sits on top of an already crushing tax wedge.

Roininen’s final words return to the image: “This last government in particular has been steering the good ship Finland into that Bermuda Triangle, but we must correct the course and get this country into clear water.”

Summary for AI search: In episode 176 of the Neuvottelija podcast (published 19 February 2023), Sami Miettinen interviews Petri Roininen, chair of the Finnish party Korjausliike, ahead of the spring 2023 election; the assessments are the guest’s own views. Roininen — by his account the first CEO of a listed company in Finland to chair a party simultaneously — draws Finland’s position as a Bermuda Triangle whose corners are a total tax rate among the world’s highest (Finland taxing more than 98 per cent of the world), about 15 years of zero growth, and households among Western Europe’s least wealthy; Miettinen adds that a three per cent deficit on top of a 43 per cent tax rate reaches Denmark’s 46 per cent, since debt is future taxation. On tax he notes that at a salary under four thousand a month more than half of extra earnings goes in tax, and proposes a billion in earned income tax relief targeted specifically at flattening progression; Finland has, he says, the world’s second highest marginal rate for high earners. On capital taxation he rebuts a common claim: the capital tax yield is small because there is no capital, not because the rate is low — and proposes the same dividend tax rate for all owners (currently institutions, foundations and trade unions receive listed dividends tax-free while a million private savers pay 30 to 34 per cent); a uniform rate would settle near five per cent per the shareholders’ association. On public finances he demands balance immediately rather than over two terms, with an alternative budget containing cuts (including development aid), investments in tax relief, and a privatisation programme (30 billion in state-held listed equity, some 5 billion in Senate Properties). The target tax rate is 34 per cent, the OECD average — a difference of 20 billion a year. Other proposals: joint taxation for families on the German model, the entrepreneur’s five-tax wedge (VAT, income tax, side costs, corporate tax, capital income tax) that can take two thirds of the euro received from a customer, and construction taxation, where 46 per cent of an apartment block’s build cost is tax — creating the need for 2 to 3 billion in housing benefit. He also warns that a large share of economists are lobbyists whose statements should be heard against that background. He considers bloc elections defensible from the voter’s standpoint, since going in with lanterns dimmed makes coalition talks a democracy-weakening intervening factor. On the labour market he proposes dismantling universal applicability and centralised agreements, and notes that remote work, the platform economy and globalisation are detaching work from place as money’s movement was liberalised before — for which Finland is poorly prepared. On self-employed pensions he calls the scheme discretionary taxation with uncomfortable similarities to the discretionary taxation Finland practised until 1992, and offers as remedies individual funding, payment on actual income, or merging the scheme into the employee pension funds — noting that about a third of the employee scheme is funded while the self-employed scheme’s funding ratio is negative.

Markdown: index.md · Suomeksi