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All right, welcome to the Neuvottelija channel.

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Welcome, Janne Juusela, one of Finland's toughest tax lawyers, actually a

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doctor of law. And I remember back in 2014, when we wrote the Libera book How Finland

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Can Be Saved, it had this concept called the Juusela model. So you're

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kind of a legend in these tax matters. Welcome.

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Thanks for the invite. Yeah, and actually that Juusela model, people don't talk about it that much,

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but I remember there were these kinds of, uh, insights, that

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for example, like, inflation shouldn't be taxed, I mean, uh, generally at all,

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you shouldn't tax, like, cash, and not like dreams or the tax authority's greed, and

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these kinds of principles I would respect and hope that the tax authority and

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the politicians too would bring to the table. Yeah, I do need to clarify one thing, that it

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was actually for the elinkeinoelämän valtuuskunta (EVA), when I did this in 2014, this

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thing, where this Juusela model was, but I've also done a lot with Libera,

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various studies and other things, so

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yeah, this was, because it was at the same time — I was writing, well, a book for Libera, so

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we borrowed that content fresh and then modified it a bit,

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because it wasn't quite perfect after all.

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Yeah, but, uh, let's start now with this right-wing government's

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structural changes, especially the decisions related to taxation, and

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I'm actually quite glad, there's sort of, like, investment banking background here,

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his client base has nevertheless been tried to be understood here like this

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over these three years and, hasn't, hasn't, uh, these have here mainly been

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good, what's come out of it? Well yeah, if you think about this tax policy here, here

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then yes, a lot, a lot of, uh, good things have been done, and quite significant

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things. Probably the most important, the most important thing is that, uh, earned income taxation

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could be eased, and especially that progressivity, which has been

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the biggest, biggest problem in that earned income taxation. That is, that extra work

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is taxed very harshly. In Finland, internationally, it hasn't been — if you look at

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the taxation of low earners or middle earners, then our taxation hasn't

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been all that, that harsh after all. But then already at middle income levels or

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even below middle income levels, then that, that taxing of extra work, that is that

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progressivity has been internationally sky-high. And now, now the Orpo government

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made a really significant, significant, uh, decision and lowered the highest

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marginal tax rates now to 52%, which is, which is definitely, like,

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a hat-worthy achievement. That's right. So, worthy [laughter]

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also hat-worthy. So, uh, that, from 59 to like 52, that was like a significant

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move. Of course you should aim to get below 50, but this was like, for once,

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they dared to do it, and, and that's good. Then on the capital side

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a lot of good things have been done. I mean, like I said at the start, you shouldn't estimate

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tax — you shouldn't, uh, tax in advance, and you shouldn't like that

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by taxing things that you actually want more of, than, say,

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capital or wealth or, or work, and this isn't, like,

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understood. So let's take one example now, that this, uh, quite like

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the stamp duty, uh, on that share transaction,

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before this right-wing government, was taxed like a bit in advance, the whole

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purchase sum was taxed, especially in advance, with that fairly small 1.5% tax, but

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still a bit, assuming that, yes, these, say, additional purchase prices from here

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will come, so let's just take it upfront to be safe. Mm. Let's go through that, so

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how did this change, so that

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it has, has, has been changed now so that, that only once, uh, finally

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the amount of the additional purchase price is confirmed, only at that point then

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is the additional purchase price taxed. Up to, up to now it's been a bit

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like a gray area, and the taxpayer has been required to provide various

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reports and other things, and quite often it's actually been taxed already before there was

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full certainty whether that additional purchase price would materialize. This is, this is a

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welcome reform, as such it sounds like a fairly small technical reform,

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but it creates clarity and predictability, and specifically, like you said, so, so

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it follows that principle, that taxation only happens at the point when it flows into the cash

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and is realized. Yeah. So

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so it's the ability-to-pay principle. That's right. Now, for example, if there's

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been agreed that there's a company sale, that comes to, say, 10 million

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as the base purchase price in cash at closing, and then there can be,

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say, a variation, that five times next year's, uh, EBITDA,

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the portion exceeding a certain level, so that can be like a range, so

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then previously you've had to kind of estimate whether it's [laughter]

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now, then, what will materialize from that, and take that

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view in advance and pay tax on it as well. Now it's such that

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if from that range, say, 5 million comes out, then on those five

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million, that, uh, tax is paid. And not on the random stuff, if nothing

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comes at all, then you don't pay any tax at all, so this is, in my opinion, a really

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sensible principle, and it also encourages a bit, uh,

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creating also that kind of structure, where both parties' interests are taken into account

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even though I'm not really a fan of it as such, but it's often, like,

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a good way to share that future

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uncertainty's risk. Yes, yes, yes, it is nevertheless

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a really common mechanism and understandable. It really does help, like,

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getting deals done. So, so, uh, there's this kind of mechanism,

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with which you can then make sure that that

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business is in that, that kind of condition, and, and also that

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future turns out to be the kind that was envisioned back at the time of the deal

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at the time of the deal. Yeah, that's right, and let's continue with this theme, namely

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share acquisition. This now is legal jargon,

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sometimes it goes a little wrong anyway, so always correct me if it does, uh, since you

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you know the exact terms, and I as an investment banker always tend a bit

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to just wing it in that direction sometimes. This is, by the way, a common division of labor generally

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in company sales, that I get forgiven if I use the wrong legal

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term, but you get forgiven less. So, so, uh, share acqui- — that is the other

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way then, uh, to get into the same boat, that if you have, say,

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a current owner, who sells the firm to another, and then, say, they want to

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combine them, or they just want, otherwise, this current owner's

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group to continue, then in this old model, wasn't it the case that you had to

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actually break off this share acquisition, take the money, pay

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as much as 34% to the tax authority, this capital gains tax, then, uh, on the original

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acquisition price or other, uh, computed price's difference, and then with that

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like drastically shrunken net, uh, money, buy then those new

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shares — so this was again sensibly reformed here.

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Mm. Mm. So do you mean this share exchange?

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Share exchange. Yeah, yeah.

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Well yeah. It, it was reformed exactly so that, that for example

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the cash consideration limit was then raised, but even so there still is, is, that

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it was raised to 50%, but it's calculated from the share's nominal value. So it

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doesn't necessarily always, always bring, still, still, uh,

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relief to these, these situations, but, uh, the share exchange provision

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was also changed at the same time, same time, so that, that it was made possible,

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that a party to a share exchange can also be non-EU

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companies or individuals. So, so, so in that way, the share exchange's

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application was expanded, although then, the same, the engine here in

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this reform was this, this massimuija massimuija, uh, provision, with which it was inten-

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-ded, or the intention was to prevent that, that, that a limited company's, like,

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net assets could be inflated by doing a share exchange

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with an operating business company. So, so, that, that

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the operating business company is transferred there, there under the new

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holding company, in which case if the operating company's fair value can be

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shown to be clearly higher than the taxable value, then, then

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into that new holding company you could get, get the highest net assets, and through

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that you could then distribute, distribute tax-free dividends. So this was, this

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this, this, uh, this massi- massim- [cut off]

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massimuija idea. But in that connection, indeed, the share exchange rules were also otherwise changed

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ah, I thought that, that these were, or there could also be other motivations. I

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just remember, uh, once I did — I was on the Metso team at SCB, we were

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uh, [scoff] we made, uh, a share exchange offer for that Tamfelt,

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so then we had to calculate like crazy, whether that 10%, uh, would be enough for those

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cents, that you then need, like, for those divisions, and this kind of, like, total

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nonsense, so okay, so if now this, uh, it's still book-value, uh, that 50

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percent, not 10 percent, but then at least, like,

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these kinds of, like, completely ridiculous, uh

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Yeah, yeah. or micro-calculations, like, disappear. That's true.

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Yeah. I mean, yes, in many worlds there might be, uh,

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there might then be, uh, that it's accepted, like, quite, quite outright

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just, like, entirely, like, a share exchange as such, one hundred percent

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a rollover, for as long as until cash comes in.

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Yeah, and this, in my opinion, uh, would be, that, that would be

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the sensible principle, that then, like, you do those deals against money, and not, like,

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settle this, like, sort of, greed. I — in my opinion this is sort of also a general

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I mean, kind of like a media and left-wing delusion, that people

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might have, like, quite, quite, uh, with a straight face, these kinds of claims,

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that, uh, there is, is, like, this kind of unrealized income, that now should

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every year, always, like, somehow get, like, cashed in. And there is, like,

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some sense to it, that then some, some, like, endless jackpot might remain, like,

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completely unclaimed, and then, uh, the person in question just walks off, say,

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elsewhere, and then, uh, you're left outside Finland's borders. So even, I mean,

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in that silly exit-tax thinking there's like some grain of sense, but usually this

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is based just on, like, trying to, like, milk it in advance, that

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uh, the golden eggs, uh, my — or I don't know if you can milk those geese. Yeah

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[laughter] yeah, in my opinion an important feature of a good tax system is,

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that, that only realized appreciation in value is taxed, and it follows, like,

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the ability-to-pay principle. So, so only once it's realized

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as cash money, then it should be taxed, like, as a main rule, that it's

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in my opinion a sound principle as the main rule in taxation.

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Yeah. Yeah. But then that massimuija provision, I mean, as such, uh, the background to it is

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that [clears throat] a bad-faith interpretation isn't, like, any

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particular operational reason to, like, increase that share substance's, uh,

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mathematically calculated value, so that this, this, like,

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is then used as the basis for a low dividend payment. So isn't it like that,

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8% of that substance, which, uh, leads at most to that substance which is

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150,000, like, in dividends, so is it now then something like 1.6 million and change, so

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uh, you've then been able to pay it at the 7.5% dividend tax rate, then the idea has been

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been a bit like that, well even though the company's, like, real value doesn't

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like, require it, so this kind of calculation is made, that this, this

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substance is brought up to that 1.6 million and change. Dividends can be paid,

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so this is now what's being tried to be solved here, and as a side effect then

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all kinds of other, other ripples come then, legal order —

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as such, in that, these social media influencers have acted, as such, quite in line with the

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system in force, and those, the operating company's

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shares have as such been valued correctly, and the tax authority too has often accepted that.

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It's a matter of the system having structural flaws, and now, now this one

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symptom is what they wanted to address, that the clearest thing would be that

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uh, the dividend tax system would be reformed to be simpler and

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more neutral, and then there would never have been any need to do

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anything like trying with share exchanges to get, get net assets

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increased. Yeah. This actually goes back, uh, at one time

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uh, I once went to [unclear] business school, and there was

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this kind of, uh, homecoming day, and, uh, professor emeritus Niskakangas was

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there, so I went right, like, to see him, like, in person, just so that I

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could get to tease him about this, uh, avoir fiscal change, that this now

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goes back into ancient history, but back in the day we did have this kind of

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really good and easygoing system called avoir fiscal, in which, uh, this

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personal and corporate taxation were combined into this kind of seamless

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pipeline, which then maximized the incentives both for the company to make a profit,

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and for the shareholder to bring this taxable capital income to the state's

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coffers and into their own pocket, and then this was broken, and for mysterious

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reasons, and then, uh, this kind of artificial split was made, which I don't know

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if it exists much elsewhere in the world, that there's like listed and

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unlisted companies, so this is, in my opinion, like, quite a

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really strange structure, that, like, haunts us in the background. And but not

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worth breaking it in a way that, like, it gets crapped up like,

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toward maximum benefit. The model that I've actually proposed

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already back in 2014, or even before that in some contexts, is specifically this,

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that you'd simulate the same end result as

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avoir fiscal, but much more simply. So the end result would be

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that, that the total tax rate on distributed profit is

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always the same as the capital income tax rate. Mm, 30%

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m and, and, uh, and then also, also all

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companies would be treated the same way, there'd be no difference between a listed and unlisted

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company. And this, well, this discussion has been just about that, quite

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many, I mean, really widely support a neutral and simple

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model as such, but then the differences there — my view is that it should be neutral

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and simple, but it also has to be competitive and encourage growth,

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that kind of model. So I'm talking about that

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total tax rate of 30. In many circles, though, they talk about it, that it

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should be at the level where the total tax rate on listed dividends is currently above,

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clearly above 40. So, so this is the, the reason why

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somehow reform projects have apparently, like, stalled. This kind of, I mean,

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neutral, simple dividend tax model, well,

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recently, for example, many business organizations have supported it,

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but, but then, the political debate apparently concerns,

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clearly concerns that, that, like, the level — what, what, what that total tax rate

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should then be. Yeah. And then

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[sigh] [deep breath] this kind of, uh, some European Tax Foundation, uh,

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according to a comparison, this 34% top tax rate on capital is, uh, Europe's — and probably

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also the world's third highest, so in a way there's this kind of, like,

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left-wing delusion, that because we've gotten used to those 59 and 52 now, marginal

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tax rates, on the labor side somehow nobody, like, looks at all at how these other

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countries in the world tax this capital, and, well, we do have

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a really tight tax base — in many countries there are nominal, like, tax rates, but then

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a lot of exceptions and tax exemptions, for example after certain holding periods. So

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and compared to wage income [deep breath]

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with wage income there isn't that kind of inflation effect, the way, the way

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the same way as with capital income, especially, like, capital gains, that

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if you've owned, owned, uh, held for several years, and

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under these kinds of normal conditions, when we also have inflation in the economy, then

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then indeed that kind of taxation really tightens up very, very harshly

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at some 34% nominal tax rate. Yeah, that's right, you can understand that

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wages are always paid for that current month's work, and, and, like, but then

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like, the main portion might have inflation adjustments made to wages. That's

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how it is, and, but I mean then with investing there might be, say, a 30-

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year delay, in which case then that money from 30 years ago is, like, uh,

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if it's taxed like entirely on that increase in between, which is purely

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inflation, then it, well, it could, say, in real terms be

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zero profit or even a loss, but still, still, still, uh, then the nominal

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profit can be, be significantly large. Yeah. Then, uh,

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in Europe's more successful capital market, that is Sweden, there's then

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also been made a long time ago, uh, in 2004, this kind of reform, that

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inheritance and gift taxes are, uh, subject to capital income tax, and not, not, uh

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this kind of separate inheritance-gift tax's, uh, wealth-tax valuation. So those receipts

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can be left uninterrupted, uh, so that, and because of that people's, like, holding periods

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are, like, considerably longer, and longer than in Finland. And

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then somewhat older gentlemen and ladies have, like, an incentive still to

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invest, because it's not, like, so obvious that that holding gets cut off

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like, at the heir's neck by cash-payable inheritance taxes. Yeah.

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Right, right, this, this is, in my opinion, the same phenomenon, that we maybe haven't

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understood. This debate that we're having around here is really naive

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around it. Yeah, yeah. Yes, it was, like, my

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opinion, like, this government's biggest minus was that, in tax policy, that

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that, that inheritance and gift taxation, then, wasn't

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dared to be abolished. There's still so much evidence from our neighboring country,

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Sweden, that, uh, that it back then had practically only

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positive effects, also on total tax revenue. Of course,

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after a small, small, uh, initial dip, but — and how much it has

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has, has, like, strengthened that, like, ownership, and increased Sweden's

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competitiveness, and for its part also increased this kind of, like,

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[scoff] blue-and-yellow

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capitalism — these knock-on effects are, like, significant. At that event was

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the Chamber of Commerce's CEO Juho Romakkanen, mind — this was being deliberated, so

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I then, uh, improvised on the fly this kind of thing, that now Riikka Purra and

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her associates surely won't bother to reopen this, the inheritance tax, that there's that

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7.5-thousand, like, tax-free portion, and then there's that 30-thousand, uh,

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inheritance tax's, like, tax-free portion for this gift tax and inheritance tax, but I

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say that now you could, uh, get some jingling money into the state's coffers, by doing

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like, on the portion exceeding these, like, uh, to that gift tax, that

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with a stamp duty you could then, uh, top it up, say, for relatives then, uh,

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for direct heirs then, uh, say with that half-percent, that gift tax,

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and from that you'd immediately get more tax into the state's coffers, that

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[scoff] right, right, this could still be done within this government's term. It wouldn't be

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such a huge deal, since, if somehow it feels like the inheritance tax is

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now like a taboo during this government term, then

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this kind of small technical tax change could then [clears throat]

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bring, um, that, in a way, also that, like, circulation of capital. Because then it remains

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like, from individual people it could there, for others then, already

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a bit in advance, so that you don't have to then, there, on the other side, the other side of the grave

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make all those capital transfers, which then might — the dying person's, uh,

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risk profile, like, changes, and their cognition worsens, so maybe not even

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AI could help there. So this, this, this would be, like, useful. But this kind of

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amazing proposal. I don't know if there's political hope for it now, but if Riikka

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Purra, if you're listening here, then that half-percent, uh, gift tax top-up

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tax, still bring it into use here. Yeah, on that topic still, inheritance and gift taxation, so

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it's been quite a strange feature [scoff] in this Finnish debate,

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that, that it's gained a significant position, like, as an argument, that if inheritance and

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gift taxation is abolished, then in some situations this, this heir's

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uh, taxation might actually increase. I mean, if, if you then sell quickly after that,

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that this, of course, always when you make changes to the tax system, then

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of course these kinds of situations can come up, but, but the essential thing is, that it

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is — it's in the heir's [scoff] like own hands. Because of taxes, you don't need to,

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because of the inheritance tax, no one has to sell, because it wouldn't exist anymore. And

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then if you do sell, then you get cash in hand, with which you can then pay that

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capital gains tax, so yeah, that's right. And then we could also

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push for a transition period for these, these current, uh, exceptions, say that 30 thousand,

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if that then bothers people. But I mean, that was like, even that, uh, Wat's

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paper was like just outrageously bad, because it didn't deal with

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like [scoff] business ownership at all. It focused on something like

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real estate, and, uh, and then, again, what I just remember from it is

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uh, the then chief economist of Suomen Yrittäjät then made exactly that

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calculation, that compared — assumed that at the moment of death everyone would sell with this

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new system immediately, uh, at the capital income tax rate, and tax would result,

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whereas you often have, like, those, uh, tax-free thresholds, so, and then

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ended up then with this rather strange, like, statement, that, um, uh,

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for entrepreneurs, that inheritance tax change was harmful, even though here

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there are two different tax subjects. That's the deceased entrepreneur, and then their

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heirs, but yeah. But this was like just

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hallucination, this whole debate. I don't know how much, I mean, this kind of

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like, as a doctor of law, do you see this debate as absurd, or

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do you have this kind of gentle view of these people, that, that everyone is trying

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to understand these things from their own point of view.

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Well yeah. I mean, yes, I of course, all arguments, uh, they need to

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be, as such, appreciated and evaluated, like, like, quite

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with a clean slate. What I see, like, right in my work is that from Finland's

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point of view this is a worrying situation, that, that, uh, so many

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wealthy individuals and families are leaving Finland, and of course there are, are other

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reasons too, but yes, this inheritance and gift taxation is, I would dare say, the biggest

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single reason why, why people move, move away, uh, from Finland,

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so, so because of that — and that's not the only reason to — inheritance

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and gift taxation should be abolished, by no means. In my opinion, problems also arise quite

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among ordinary people, who get, get, uh, inheritances or gifts

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and, and, uh, those inheritances and gifts often aren't any cash money, but the tax

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still has to be paid regardless. So, uh, there's both this kind of

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like, fairness and ability-to-pay problem, and then also a competitive-

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competitiveness problem. That's right. And then, once again, that

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like, scrambling around with the tax, like, you can see it from the fact that the estate has to right away

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draw up the estate inventory, and it has to immediately pay up to the tax authority, and then be divided. And

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whereas then, say, in the Swedish model, that, like, in a way, it isn't

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isn't such an acute thing, that it's — you can, like, look at it and

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calmly, like, not, not panic, and then make a sensible plan,

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whether to sell something, or over time, and then, uh, against that you get

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cash flows when you sell, and then you pay the taxes. This is, like,

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in many ways much calmer and sensible, and likewise then, uh, you don't need to

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panic — that, uh, dying person, that they, like, in advance have to, like,

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stress about what this now, uh, bomb — if, say, they're, like, an unlisted

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company's owner, where then, uh, both the ownership and, uh, the taxes go off

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then, uh, and the children have, like, no idea about it, so it can end up being

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a really stressful situation, and then you'd suddenly need to get some company sale done,

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and even there, then, there's, like, uh, maybe no understanding that those are long

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processes. And then, in a way, for the same reason,

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rich people in Finland tend to be older people, so often it would then be

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this kind of wishful thinking, that some other old person buys your old person's

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ownership, but what sense does that make, they know a lot less about it than you do.

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M, so it should be some kind of institutional structure, or some, some

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like, this kind of, uh, owner, who's able to take the reins from it and develop that

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business, so then it's no wonder that people then leave

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out into the world, and then structures get made where all these, like,

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problems go off right in your own and your family's face. Mm. And you can now note that

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then, when — if you look at generational transfers, like, in companies,

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so when those relief provisions apply, then the total tax burden

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is moderate. With that, surely many can live, but in very many

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situations they don't apply, and then, then, uh, it's a very serious and

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difficult situation, both, of course, for these companies — they have to

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prepare and put, in a way, like, funds aside for a rainy day, but also, also, like,

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for Finnish society, and for companies', companies', like, dynamics.

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Yeah, yeah. On this, the family-business association calculated, that that stashed-away fund would already be quite

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in the neighborhood of, say, 5.5 billion, and

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then again, Swedish studies have shown that it has brought a lot of

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long-term steadiness, and those companies grow more, and since that

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reform, and take more risk, and Sweden is this kind of, like,

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small-capitalist's dream right now, that there's capital to be found there, and

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the stock market is really strong, and, and there's that capital turnover happening, and

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circulation and risk-taking, and, by the way, we have this, this Samuli Knyfril,

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uh, of Trans Corporate Finance too, put out a report on that back in [20]15, so

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he has done really good research on this, specifically on unlisted, uh,

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[scoff] owner-companies and their, like, capital pool, that they are, compared to others,

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great research work. I don't know how much you follow this,

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actually the doctor's hat, and dive into this, like, industry research, that

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for example, just these Swedish studies, or studies. Yes, I do, like, follow

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follow, that [clears throat], of course, like, as my main job it's, it's quite

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like on the advisory side over there, but yes, I do

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I also, in that sense, from old memory, have a researcher's hat on, that

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yes, I do now follow, follow to some extent, some extent, also, like,

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research and various discussion, in a way even academic discussion

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and about tax policy. I'd suggest, that, well, later we go to the insider

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side, and talk a bit more about this, that I myself, uh, was on a separate-law

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like, drafting working group as a permanent expert. Back then I was

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Nordic Trust's managing director, so we made this kind of separate law, uh, on bond

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holders', uh, representative and security agent. Absolutely

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great stuff, but that's, in a way, on my end, that legal side. And then not

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these other reforms that haven't come yet, uh, but they are very

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strongly in preparation, and, like, the sure one, the law, is this, uh, corporate tax

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moderation to 18, that

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in my opinion it's already now, like, guiding investments, growth, and risk-taking,

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because when people see that, then from those future profits they'll get to keep

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more. Yeah, it's definitely, it's, it's an important, important, uh,

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component of corporate taxation, that is, that, uh, supports then

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supports growth and making investments in Finland, and, uh,

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also ownership. So, so, yes, it is, it is an important, important measure, and, and that

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what's of course worrying is that, that in some circles it's

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been announced that it would be, be reversed, or something along those lines, but

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hopefully it won't come to that. What I of course also have to remember

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is that the corporate tax rate isn't, isn't of course the only thing. It's perhaps the most important

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component, of course, but not the only one in corporate taxation. So then there are

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a lot, a lot of different factors, where, where

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uh, Finland's, Finland's tax system should, like, be improved, and, and brought

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to a more competitive level, which, which then hasn't, hasn't, uh, hasn't, hasn't

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for one reason or another, like, been implemented. Just, as examples, one could mention

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for example, that we have, we have this kind of, like, share disposal

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tax exemption, that is, these fixed-asset shares, so

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so there, like, little by little, these interpretations, and also through case law,

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have tightened, tightened so significantly that, that, uh, it is, it

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in a way it's no longer this kind of, like, internationally-modeled

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participation exemption, which is what it was originally meant to be. Originally it

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was enacted back in 2004. Mm. So, for example, this kind of

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fixing it — that, that is a genuine harm to competitiveness, because, because

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for example, a corporate group would rather set up some, some structure with

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some intermediate companies or holding companies

401
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invest, say, rather in Sweden than in Finland. M

402
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so, and it causes a lot, a lot of tax risk in Finland, and interpretive uncertainty, and so

403
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on. Then we have, for example, like, a disproportionately broad

404
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application practice with this kind of general anti-avoidance provision,

405
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which causes a considerable amount of uncertainty

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in many situations, and, and also then, also then various disputes, which

407
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weaken, like, Finland's system's predictability and, and reliability

408
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significantly. Yeah. On that, EVA's Emiliina Kujanpää, who

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has also been here, wrote, in my opinion, exactly about these problems, like,

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a commendable report, that that [scoff] tax risk is also, I mean,

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that you don't know, uh, which system it'll go by, if that fixed

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asset shares' treatment is, like, totally absurd, that if you have, like,

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there it's really extreme, that either there's no taxation at all, or then it's like

414
00:29:56.720 --> 00:30:00.080
uh, the full pot, and then on top there's, like, still the costs of you going to litigate

415
00:30:00.080 --> 00:30:01.840
your own case, and yeah

416
00:30:01.840 --> 00:30:06.360
possibly, uh, advance tax ruling interpretations, they don't really want to give,

417
00:30:06.360 --> 00:30:10.080
because that interpretation has been driven narrower and narrower, so that

418
00:30:10.080 --> 00:30:13.640
everything goes off right in your face, and the normal international model is,

419
00:30:13.640 --> 00:30:18.399
that, that if you own at least, like, 10%, and have owned it for one year,

420
00:30:18.399 --> 00:30:22.039
then all — the limited company's, uh, of the other

421
00:30:22.039 --> 00:30:25.320
company's shares that you own — the disposals of those shares are

422
00:30:25.320 --> 00:30:28.080
tax-free. Yeah. But then in Finland, they require

423
00:30:28.080 --> 00:30:32.056
like, on top of these, these, these clear criteria,

424
00:30:32.056 --> 00:30:35.440
[clears throat] various kinds of, like, a business connection, which is

425
00:30:35.440 --> 00:30:41.226
a very, very kind of, like, interpretive concept, or then some other link

426
00:30:41.226 --> 00:30:44.320
[clears throat] to the transferring company's business activity, which is

427
00:30:44.320 --> 00:30:48.600
also completely murky, in the shadows, as to what with that

428
00:30:48.600 --> 00:30:50.640
then, and at worst, you end up building some strange

429
00:30:50.640 --> 00:30:54.000
like administrative contraptions then in both companies, you fill it out, and then

430
00:30:54.000 --> 00:30:57.200
it turned out there was no benefit at all, you just got costs. And then those taxes came

431
00:30:57.200 --> 00:31:00.639
anyway, right in your face — it's like totally ridiculous nonsense, yeah. And then again, on the other hand,

432
00:31:00.639 --> 00:31:04.600
we then do quite readily accept that, say, dividends are, uh, between companies

433
00:31:04.600 --> 00:31:07.880
tax-free, so then, what difference is there now, that this

434
00:31:07.880 --> 00:31:10.760
is, like, somehow just — yeah, yeah, there's a computed thing here. Someone has just

435
00:31:10.760 --> 00:31:13.399
decided now, uh, this isn't at all [scoff] nice, that

436
00:31:13.399 --> 00:31:16.960
these — you're not taxed on this in between, in advance. M

437
00:31:16.960 --> 00:31:23.039
yeah. Uh. Well then, uh, one or a couple more of these kinds of, uh, bubbling-under, uh,

438
00:31:23.039 --> 00:31:27.960
uh, probably, like, uh, still somewhat open matters is this

439
00:31:27.960 --> 00:31:32.480
world's best, uh, stock-option taxation, that is — Riikka Purra did say now let's get this

440
00:31:32.480 --> 00:31:38.519
sorted out, so as background, back in the day my first boss

441
00:31:38.519 --> 00:31:42.080
that, uh, Petteri Fagernees, back in the day, distinguished himself on Fortum's board

442
00:31:42.080 --> 00:31:45.639
as chairman, together with Mikka Lilius, and then, uh, before that there had been quite

443
00:31:45.639 --> 00:31:50.360
a lot of, like, Nokia millionaires made through options, and back then there was this kind of

444
00:31:50.360 --> 00:31:57.000
lovely system, that, uh, those options were, quite rightly, taxed according to this, this

445
00:31:57.000 --> 00:32:01.039
international principle, as capital income tax, and, and only then

446
00:32:01.039 --> 00:32:05.399
when they turn into money, that is, you sell, uh, sell the shares. But then

447
00:32:05.399 --> 00:32:08.880
over time, this too got perverted in a way, that they take, take them just to be safe

448
00:32:08.880 --> 00:32:12.600
at that moment, and also take earned-income tax on top. So isn't there now, in this outlook,

449
00:32:12.600 --> 00:32:19.279
like, a bit of light at the end of the tunnel, that, yeah, that up until now, or for a long

450
00:32:19.279 --> 00:32:24.320
time, at least the last 15 years, has, m

451
00:32:24.320 --> 00:32:29.279
the taxation of options been such, that when, if you sell the option, then, then

452
00:32:29.279 --> 00:32:34.440
then, then it's taxed, and it's taxed as earned income, but, and also in that

453
00:32:34.440 --> 00:32:41.200
case, that when you subscribe for the share, that subscription moment triggers the taxation, that is

454
00:32:41.200 --> 00:32:44.919
when you subscribe for a share with the option, and if you got the option, say,

455
00:32:44.919 --> 00:32:50.120
for free, then the share's fair value is, in practice, taxable

456
00:32:50.120 --> 00:32:55.320
earned income. Which, as we know, our highest marginal tax rates

457
00:32:55.320 --> 00:32:59.039
still are, and have been, like, world-class, and often

458
00:32:59.039 --> 00:33:02.600
this kind of extra income goes right into those highest marginal tax rates,

459
00:33:02.600 --> 00:33:07.919
so that's an extremely harsh taxation before there's, uh, any cash, cash

460
00:33:07.919 --> 00:33:16.720
actually come, come into your hand. Now, now the intention is to reform it, so that, that still

461
00:33:16.720 --> 00:33:22.320
still, when, uh, a person subscribes for shares

462
00:33:22.320 --> 00:33:26.760
based on the option, the taxation isn't realized, but taxation is only realized then,

463
00:33:26.760 --> 00:33:31.200
when the shares are sold. Yeah. And

464
00:33:31.200 --> 00:33:37.200
probably the principle would then be, that, that up until that point,

465
00:33:37.200 --> 00:33:42.320
in a way that increase in the share's value, up until, until

466
00:33:42.320 --> 00:33:46.440
uh, the share has been subscribed, then it goes, would go, like, into earned-income taxation's

467
00:33:46.440 --> 00:33:50.000
scope, and then after that, once the shares

468
00:33:50.000 --> 00:33:54.360
are owned, then the increase in value after that would then be under capital income taxation's

469
00:33:54.360 --> 00:33:57.039
scope. Yeah. As such, what's important is that now

470
00:33:57.039 --> 00:34:01.240
it isn't, like, cashed in with money in advance, but also that, uh, that profit isn't

471
00:34:01.240 --> 00:34:04.720
any longer, like, earned by work in any way, once it's, like, been turned

472
00:34:04.720 --> 00:34:07.320
into a share, so of course it has to be capital income, that

473
00:34:07.320 --> 00:34:09.760
so, once again [scoff], here there's this, like, when

474
00:34:09.760 --> 00:34:14.560
Finns have this kind of delusion, that it's totally okay to compare over 50%, uh, that

475
00:34:14.560 --> 00:34:17.480
this and that, and then, like, the effect is that then there haven't come

476
00:34:17.480 --> 00:34:20.800
option millionaires, but there haven't been tax revenues either, so, or once again

477
00:34:20.800 --> 00:34:25.480
I mean, uh, you get what you don't tax, and what you tax, well, you get

478
00:34:25.480 --> 00:34:28.760
less of. So it's nothing more complicated than that, in a way they came up with, like,

479
00:34:28.760 --> 00:34:33.320
the perfect way to, like, kill the whole taxation — the tax revenue from options, from options

480
00:34:33.320 --> 00:34:39.560
altogether. Plus then, uh, nice for you if you're, like, some inventor or founder, and

481
00:34:39.560 --> 00:34:44.320
then the Yanks take the option money, and you don't even dare use the options,

482
00:34:44.320 --> 00:34:47.760
because, uh, you'd have to tear that money from somewhere, so you're

483
00:34:47.760 --> 00:34:50.960
you're, uh, a poor person, so where would you get those tax funds from.

484
00:34:50.960 --> 00:34:54.560
Exactly. In general, there should always be some reasonableness here, that if

485
00:34:54.560 --> 00:34:58.520
money is demanded to be pulled into the coffers, there should be some kind of test, that

486
00:34:58.520 --> 00:35:02.599
can this, like, tax subject, like, in any way, like, cope with this, and

487
00:35:02.599 --> 00:35:05.720
then, by the way, all sorts of things have been built around this, like, well okay, pay

488
00:35:05.720 --> 00:35:09.119
later, take this kind of, like, some crazy interest rate, which runs from this

489
00:35:09.119 --> 00:35:12.079
point on, that this is somehow, like, just really, really

490
00:35:12.079 --> 00:35:17.800
like greedy, this tax-bear's, uh, thinking, like you said, so often it's not

491
00:35:17.800 --> 00:35:21.800
understood that, that people, on the other hand, in Finland are really, like, law-abiding

492
00:35:21.800 --> 00:35:24.560
in that way, that they, like, try to pay these, unless it's, like, totally

493
00:35:24.560 --> 00:35:29.280
unreasonable, or assessment-based taxation, that situation. I

494
00:35:29.280 --> 00:35:32.880
would have kind of the same, by the way, as a side note about these ancillary costs, that

495
00:35:32.880 --> 00:35:39.400
uh, this YIL, which the Marin government, uh, back then, uh, during that government's term

496
00:35:39.400 --> 00:35:43.880
brought in, was unreasonable, because then there were those strong, uh, features

497
00:35:43.880 --> 00:35:48.240
of assessment-based taxation in it. That, uh, in practice, at the tax authority's level, an operating pension

498
00:35:48.240 --> 00:35:51.839
company complex got, like, assessment-taxed with a single payment, so there's really no

499
00:35:51.839 --> 00:35:56.040
sense in that, if someone, someone, uh, outside

500
00:35:56.040 --> 00:36:00.280
says what you should have earned, and then takes 25% of that, then always

501
00:36:00.280 --> 00:36:06.800
these kinds of, uh, assessment- and advance rulings, without liquidity or real, uh,

502
00:36:06.800 --> 00:36:10.160
value creation beforehand, are really, really stupid, in my opinion.

503
00:36:10.160 --> 00:36:17.440
Yeah. And one, uh, actually, kind of a segue from that, that Finn-

504
00:36:17.440 --> 00:36:21.440
-ish tax system also has, like, serious problems, like,

505
00:36:21.440 --> 00:36:23.319
in terms of legal protection, m

506
00:36:23.319 --> 00:36:29.839
and on that, indeed, there's now a really fresh EVA report — this Kunnas'

507
00:36:29.839 --> 00:36:35.200
head, yeah, so, so, uh, for example we have it so that, that

508
00:36:35.200 --> 00:36:40.760
in principle it's in the law that in an un-, unclear situation, like, like, [U]

509
00:36:40.760 --> 00:36:44.760
the decision should then be made in favor of the taxpayer

510
00:36:44.760 --> 00:36:51.560
accordingly, but in practice this has remained a dead letter, and

511
00:36:51.560 --> 00:36:55.520
I would dare say that the prevailing practice is that unclear situations

512
00:36:55.520 --> 00:37:01.400
go against the taxpayer. That it is, or it's at least, like, unfortunately

513
00:37:01.400 --> 00:37:04.405
common. Mhm. That, so, so for example

514
00:37:04.405 --> 00:37:06.560
[clears throat] like in tax audits, or when making

515
00:37:06.560 --> 00:37:11.480
tax decisions and so on. After that, then when, like, these

516
00:37:11.480 --> 00:37:16.640
come, of course, then if you feel that a tax decision is off, then you could

517
00:37:16.640 --> 00:37:20.800
then file an appeal request with the Adjustment Board, which isn't

518
00:37:20.800 --> 00:37:24.359
however, like, an independent, independent court, but rather

519
00:37:24.359 --> 00:37:29.960
a unit within the Tax Administration, where then, then, uh, there isn't, isn't

520
00:37:29.960 --> 00:37:33.720
in a way, like, the procedural mechanisms of a court proceeding, there's no oral

521
00:37:33.720 --> 00:37:39.800
hearing or anything, and, and, uh, and the processing times are incredibly long.

522
00:37:39.800 --> 00:37:46.640
Mm. From one to two years, or even longer times have been seen. So, so, so these are, and

523
00:37:46.640 --> 00:37:51.640
then we have, like, and since there are really a lot of, like, these open-to-interpretation

524
00:37:51.640 --> 00:37:59.200
tax provisions, and since the Tax Administration easily makes, like, like, the tax recipient's

525
00:37:59.200 --> 00:38:03.240
favorable decisions, then the importance of advance rulings of course

526
00:38:03.240 --> 00:38:06.760
like grows significantly. But even in those there's then, like, in this EVA

527
00:38:06.760 --> 00:38:11.119
report as well, quite a lot, a lot of different problems were noted, and then

528
00:38:11.119 --> 00:38:16.280
indeed there's also that problem, that VOVA, that is, the Tax Recipients' Legal Services Unit, can

529
00:38:16.280 --> 00:38:21.880
appeal then if the taxpayer gets a positive ruling. So, so this

530
00:38:21.880 --> 00:38:25.720
can then completely pull the rug out from under, like, that

531
00:38:25.720 --> 00:38:28.839
advance ruling, just because of that too, that, that if it then goes

532
00:38:28.839 --> 00:38:33.319
to the administrative court, then that, that might take another year or two after.

533
00:38:33.319 --> 00:38:37.040
Yeah. And there are, uh, big changes here. I had, uh, Tarja Visto

534
00:38:37.040 --> 00:38:41.920
as a guest on this, uh, she dared to go through this, uh, Ahlström Munksjö, uh,

535
00:38:41.920 --> 00:38:45.800
redemption case, and, in a way, [scoff], then it also came out,

536
00:38:45.800 --> 00:38:49.800
that there was this kind of, uh, at a negative price, uh, uh, forced

537
00:38:49.800 --> 00:38:54.000
golf-share sale, so sometimes there are, like, really interesting outcomes in these, and

538
00:38:54.000 --> 00:38:58.240
then, in a way, when the level of court rolls on, like, up to the higher

539
00:38:58.240 --> 00:39:01.480
court, then you go with those decisions, and sometimes

540
00:39:01.480 --> 00:39:04.560
quite interesting, interesting final results come out of it, and, uh,

541
00:39:04.560 --> 00:39:06.760
I'm not competent [scoff]

542
00:39:06.760 --> 00:39:10.000
to evaluate those, but it's fun, fun to speculate then. I had, for example,

543
00:39:10.000 --> 00:39:14.880
just as a side note, my first thought was, for example, here in this Ahlström Munksjö

544
00:39:14.880 --> 00:39:18.160
uh, uh, in the redemption price, that I have

545
00:39:18.160 --> 00:39:21.440
like a strong principle, one share, one price, so in a way of course it now

546
00:39:21.440 --> 00:39:24.440
gets redeemed at the same price at which the main deal was made. To me it's, like, somehow

547
00:39:24.440 --> 00:39:26.800
natural, but then [scoff] when I got into that

548
00:39:26.800 --> 00:39:30.680
case, there were then reasons this way and that, that it could have gone the other

549
00:39:30.680 --> 00:39:35.800
way, and different courts overturned each other's decisions, and likewise this too is also

550
00:39:35.800 --> 00:39:40.040
like quite absurd, that there can be this kind of situation, since usually

551
00:39:40.040 --> 00:39:44.839
a limited liability company means that you shouldn't ever have to do

552
00:39:44.839 --> 00:39:47.440
a share sale, that you can always just, like,

553
00:39:47.440 --> 00:39:51.560
leave that certificate, uh, unused as worthless, but then there was just

554
00:39:51.560 --> 00:39:56.160
this kind of, like, golf share, where, uh, then, uh,

555
00:39:56.160 --> 00:39:59.480
the minority shareholders were forced, uh, like, uh, to pay for the fact that they

556
00:39:59.480 --> 00:40:01.160
were redeemed. So yeah

557
00:40:01.160 --> 00:40:03.560
yeah. But I mean, uh, [clears throat]

558
00:40:03.560 --> 00:40:07.960
as such, law too is a science and an art made by people, that

559
00:40:07.960 --> 00:40:11.560
everything can be agreed upon, and that then these kinds of, like,

560
00:40:11.560 --> 00:40:13.702
preconceptions then don't always, always hold.

561
00:40:13.702 --> 00:40:15.040
[clears throat] Mm.

562
00:40:15.040 --> 00:40:19.040
And in that sense it's good that this tax interpretation is being done, and from that

563
00:40:19.040 --> 00:40:22.119
a bit of this kind of case-law practice emerges. Maybe as a philosopher, I'd want to

564
00:40:22.119 --> 00:40:26.680
ask, since we don't have that American, uh, tradition

565
00:40:26.680 --> 00:40:29.920
where precedents create, uh, that body of law, but instead we have, like,

566
00:40:29.920 --> 00:40:32.800
this kind of — how do you put it nicely, uh, legal [scoff]

567
00:40:32.800 --> 00:40:38.720
system, where the state's power and, uh, written laws, so, so

568
00:40:38.720 --> 00:40:44.800
not, not — it's not that, in a way, court cases create it — so is there, uh,

569
00:40:44.800 --> 00:40:48.839
is there, like, some conflict here with, then, world trade, or other countries

570
00:40:48.839 --> 00:40:52.200
with? Well yeah, we, we do, I mean, the principle

571
00:40:52.200 --> 00:40:58.079
like, in the European, European way, is exactly that the legislator, like,

572
00:40:58.079 --> 00:41:05.119
enacts the law in force, and the laws, but, but we too have, like, like,

573
00:41:05.119 --> 00:41:09.599
the highest, highest courts', and the Supreme Administrative Court's

574
00:41:09.599 --> 00:41:15.160
decisions do have, like, like, uh, an effect that, like, shapes the law,

575
00:41:15.160 --> 00:41:18.480
so, so, then if the KHO, say, sets a line

576
00:41:18.480 --> 00:41:24.040
on some principle in some matter, then, then, like, as a starting point,

577
00:41:24.040 --> 00:41:30.200
authorities and other courts, the lower courts, should follow

578
00:41:30.200 --> 00:41:35.200
it, if it's this kind of, like, published precedent.

579
00:41:35.200 --> 00:41:40.000
So, so in that sense we too are, we too aren't purely, like, like,

580
00:41:40.000 --> 00:41:43.839
like, solely dependent on the legislator, but in Finland the problem has been

581
00:41:43.839 --> 00:41:48.520
that, that these interpretations are already made, like, at the authority level,

582
00:41:48.520 --> 00:41:51.720
in the lower courts, and also, for example, in the Supreme

583
00:41:51.720 --> 00:41:55.319
Administrative Court, in my opinion, in many

584
00:41:55.319 --> 00:41:59.640
cases, changes are made to the law in force that, like, go too far.

585
00:41:59.640 --> 00:42:03.720
actual changes should be made by the legislator

586
00:42:03.720 --> 00:42:08.079
in Parliament. Only, like, clarifications

587
00:42:08.079 --> 00:42:10.800
within a certain, like, framework set by the legislator

588
00:42:10.800 --> 00:42:14.680
belong to the courts, but developing the law itself

589
00:42:14.680 --> 00:42:16.599
should belong to the legislator. Yeah.

590
00:42:16.599 --> 00:42:20.960
So this, here there is that, in a way, that certain, certain kind of, like,

591
00:42:20.960 --> 00:42:23.280
tension. Yeah. But the good side is that now

592
00:42:23.280 --> 00:42:28.319
then, with just basic parliamentarism, through the right-wing government, you can

593
00:42:28.319 --> 00:42:31.920
change this, like, heavily shelved, and the authorities', uh,

594
00:42:31.920 --> 00:42:35.760
hijacked tax practice, just by making a new law, and then, in a way,

595
00:42:35.760 --> 00:42:38.319
this stupid system gets wiped away, so in that

596
00:42:38.319 --> 00:42:40.920
sense these are also good, these kinds of, like, reforms that have been

597
00:42:40.920 --> 00:42:45.040
discussed here, because they, like, wipe out that, like, mindless accumulation, and, and

598
00:42:45.040 --> 00:42:47.920
tradition that has gotten to form within that system, like,

599
00:42:47.920 --> 00:42:50.760
self-perpetuating. [scoff] Yeah. So it's then, then a tear for those

600
00:42:50.760 --> 00:42:54.680
who've been able for decades to, uh, like, hit with that provision

601
00:42:54.680 --> 00:42:58.240
onto the head of this little administrative subject, but rightly for those

602
00:42:58.240 --> 00:43:01.760
who vote in the elections then. Mm. [laughter]

603
00:43:01.760 --> 00:43:04.640
So there, too, democracy is indeed this kind of great purifier, and

604
00:43:04.640 --> 00:43:09.760
the authority then does what, uh, the democratic system commands. On that

605
00:43:09.760 --> 00:43:13.960
by the way, maybe on this, I was also, uh, when Nalle, uh, wrote for Libera just

606
00:43:13.960 --> 00:43:17.599
this kind of, uh, defense of a constitutional court,

607
00:43:17.599 --> 00:43:21.079
so I sort of agreed with Nalle for a long time, but then, uh, Heikki

608
00:43:21.079 --> 00:43:24.520
Westman came on as my guest, and then we discussed this for an hour and a half,

609
00:43:24.520 --> 00:43:29.280
that, uh, Parliament's, uh, Constitutional Law Committee is actually

610
00:43:29.280 --> 00:43:34.680
quite good, because in Finland these court levels are so terribly long, and

611
00:43:34.680 --> 00:43:39.200
in a way that basic assumption, that you're kind of, like, guilty

612
00:43:39.200 --> 00:43:43.359
uh, in that, the whole thing, when the system just drags on for, like, a decade, maybe

613
00:43:43.359 --> 00:43:47.000
even longer, so that it's actually good that this too has then

614
00:43:47.000 --> 00:43:50.880
in a certain way, a bit politically, but, like, pre-cleansed, that they take

615
00:43:50.880 --> 00:43:55.160
the slack out of it, like, right there during the law's processing and approval,

616
00:43:55.160 --> 00:44:00.920
and it's not left, uh, to someone. This is that great, great, uh, myth that

617
00:44:00.920 --> 00:44:05.119
politicians, of course, especially keep alive, that we should have a constitutional

618
00:44:05.119 --> 00:44:09.839
court — it wouldn't in any way remove the need for prior

619
00:44:09.839 --> 00:44:14.160
constitutional review at all, and that could, say, be done by some

620
00:44:14.160 --> 00:44:16.559
parliamentary Constitutional Law Committee, or by requesting an opinion

621
00:44:16.559 --> 00:44:19.920
from a constitutional court. Both are necessary. We

622
00:44:19.920 --> 00:44:23.880
we're completely lacking, in practice, subsequent review, and only

623
00:44:23.880 --> 00:44:27.480
in subsequent review can you take a position on what situations actually

624
00:44:27.480 --> 00:44:30.800
would arise. During the law-drafting stage we're a bit, like, in a theoretical

625
00:44:30.800 --> 00:44:34.200
setting still, that here there's, like, this kind of thing, and, and

626
00:44:34.200 --> 00:44:39.520
possible, and it's of course important, but subsequent review is still, or it's

627
00:44:39.520 --> 00:44:42.760
they're together, like, those are what form, like,

628
00:44:42.760 --> 00:44:45.720
constitutional review. This subsequent review, for us,

629
00:44:45.720 --> 00:44:49.559
is practically entirely missing. Although maybe I would argue like this, that

630
00:44:49.559 --> 00:44:55.559
if you take, uh, a really extreme kind of parliament, then it could, with a 5/6 majority,

631
00:44:55.559 --> 00:44:59.480
uh, without this leaving-to-rest procedure, make quite big, like, changes.

632
00:44:59.480 --> 00:45:02.800
Mm. So, so then, in a way, that, like,

633
00:45:02.800 --> 00:45:06.200
with a certain qualified majority, you can, like, indeed then, like, do that

634
00:45:06.200 --> 00:45:10.720
thing, which in some other country the constitutional court would have then

635
00:45:10.720 --> 00:45:16.160
done. So, and that now is, I mean, yes, in any case, like, the constitution's

636
00:45:16.160 --> 00:45:18.359
amendment should remain, yeah,

637
00:45:18.359 --> 00:45:21.880
like, Parliament's right, under these certain criteria, that

638
00:45:21.880 --> 00:45:27.200
the Constitutional Law Committee mainly oversees compliance with the constitution, if

639
00:45:27.200 --> 00:45:31.880
Parliament amends the constitution, then the Constitutional Law Committee

640
00:45:31.880 --> 00:45:34.720
oversees compliance with that amended constitution

641
00:45:34.720 --> 00:45:38.440
so, but you're kind of like hoping for a constitutional court in Finl-

642
00:45:38.440 --> 00:45:43.520
-and — definitely, because I have, from my own, own profession's perspective,

643
00:45:43.520 --> 00:45:47.319
found that these kinds of, like, fundamental rights

644
00:45:47.319 --> 00:45:52.480
and, and legal principles don't, don't have that kind of significance

645
00:45:52.480 --> 00:45:57.480
in Finland, for example, in legal proceedings, compared to what, what in many, many

646
00:45:57.480 --> 00:46:01.720
other countries. Yeah. So, uh, so because of that, we

647
00:46:01.720 --> 00:46:05.079
in practice can get completely, like, even unreasonable outcomes, which

648
00:46:05.079 --> 00:46:09.240
with common sense, for example in taxation, you can't understand. Because

649
00:46:09.240 --> 00:46:13.800
someone, in the administrative court or the KHO, looks at some purely technical

650
00:46:13.800 --> 00:46:18.599
technical, uh, provisions and ends up at — well, this could be interpreted, say, like this.

651
00:46:18.599 --> 00:46:22.079
For example, that someone's personal property gets confiscated,

652
00:46:22.079 --> 00:46:25.920
when alongside that there could be an effective fundamental-rights

653
00:46:25.920 --> 00:46:30.200
interpretation. So, so different proportionality principles and the protection

654
00:46:30.200 --> 00:46:34.599
of property, like, as a starting point. So if you don't have a clear basis

655
00:46:34.599 --> 00:46:38.800
to confiscate someone's property, then you shouldn't confiscate it, based on that constitutional

656
00:46:38.800 --> 00:46:41.240
property protection interpretation alone.

657
00:46:41.240 --> 00:46:45.599
Yeah. So this kind of, these kinds of things are missing, and, and

658
00:46:45.599 --> 00:46:50.400
because of that we get, get an annoyingly large number, to put it bluntly, just

659
00:46:50.400 --> 00:46:53.760
incomprehensible, like, outcomes from rulings.

660
00:46:53.760 --> 00:46:58.240
Yeah, yeah. No, I, I'm maybe open on that — I mean, earlier I've been afraid of

661
00:46:58.240 --> 00:47:02.240
this, say, the American example, that if it then becomes politic-, then it

662
00:47:02.240 --> 00:47:06.200
gets politicized, that then you bring in, uh,

663
00:47:06.200 --> 00:47:11.720
and possibly geriatric, uh, uh, far-right or far-left

664
00:47:11.720 --> 00:47:15.400
and then it's down to their, uh, whim, that, uh, that, like,

665
00:47:15.400 --> 00:47:19.520
what kind of interpretation then comes out — let's take, say, an example, that, say,

666
00:47:19.520 --> 00:47:22.960
in my opinion, that universal applicability [of collective agreements] is an injustice, that it, like, clearly violates

667
00:47:22.960 --> 00:47:27.317
uh, freedom of contract, that what right does some, uh, like, tripartite body

668
00:47:27.317 --> 00:47:30.480
[scoff] have, like, to force private contracts

669
00:47:30.480 --> 00:47:34.319
into some particular form, if they aren't even parties to it — it just feels, like, really

670
00:47:34.319 --> 00:47:37.559
silly, that this kind of thing has gone through. Well, now that it's, like,

671
00:47:37.559 --> 00:47:42.079
somehow, by luck, gotten through this mangle, by accident or on purpose, then it

672
00:47:42.079 --> 00:47:45.000
then becomes this kind of, like, uh, an outright constitutional right

673
00:47:45.000 --> 00:47:48.480
under this system, so [scoff] there could then be some

674
00:47:48.480 --> 00:47:54.000
lofty constitutional, uh, court, to which this then gets brought, like, for a decision, and

675
00:47:54.000 --> 00:47:58.079
then they end up saying that was crap, let's take this out. That's the good outcome,

676
00:47:58.079 --> 00:48:01.240
but I'm not at all sure — there could then be, say, six lefties

677
00:48:01.240 --> 00:48:03.920
and two right-wingers, and they're of the opinion that under no circumstances this

678
00:48:03.920 --> 00:48:07.160
wouldn't it then just codify that, like,

679
00:48:07.160 --> 00:48:10.720
for all eternity, this thing, that I don't know, it's not necessarily, like, it's a good

680
00:48:10.720 --> 00:48:13.800
this kind of, like, extra safeguard, and, like, you said always

681
00:48:13.800 --> 00:48:17.200
then the parliament could then redraft the constitution, in which case that

682
00:48:17.200 --> 00:48:19.240
mangle pulls it through. You'd have to comply with it then.

683
00:48:19.240 --> 00:48:22.400
But it really is, like, in a certain way, like, about institutions,

684
00:48:22.400 --> 00:48:26.480
that the more, more, like, balanced and healthier the footing on which institutions

685
00:48:26.480 --> 00:48:30.559
are, the better, better the chance of getting

686
00:48:30.559 --> 00:48:34.400
as many correct outcomes as possible. No institution

687
00:48:34.400 --> 00:48:38.119
necessarily guarantees that individual bad ones won't come out of it. But we do have, like,

688
00:48:38.119 --> 00:48:43.880
an institutional problem in that we're lacking effective fundamental-rights and

689
00:48:43.880 --> 00:48:45.520
subsequent review. Mm.

690
00:48:45.520 --> 00:48:48.240
It's just, like, an institutional problem. It's kind of, like,

691
00:48:48.240 --> 00:48:52.040
a matter of chance, how they, how they decide to take some

692
00:48:52.040 --> 00:48:54.480
fundamental right into account, say, in the administrative court.

693
00:48:54.480 --> 00:48:56.200
Yeah. Unfortunately, often it's at least not

694
00:48:56.200 --> 00:49:00.079
in the taxpayer's favor. That's right. Then [scoff] maybe that, uh,

695
00:49:00.079 --> 00:49:04.599
international agreements. I was once, uh, an idealist in that sense, that I

696
00:49:04.599 --> 00:49:09.520
thought there was this kind of, uh, strong international, uh, law and

697
00:49:09.520 --> 00:49:13.960
case law, which is ancient and based on some

698
00:49:13.960 --> 00:49:17.680
agreements too, but in these kind of Trump-era times, my faith has

699
00:49:17.680 --> 00:49:21.280
started slipping away, so it's actually good then to have purely commercial ones, that even

700
00:49:21.280 --> 00:49:24.680
the Central Chamber of Commerce even feels a bit funny, that some kind of, uh,

701
00:49:24.680 --> 00:49:30.680
commercial system gets to make, say, uh, uh, on commercial

702
00:49:30.680 --> 00:49:34.960
agreements, then, then, uh, binding legal decisions, which are

703
00:49:34.960 --> 00:49:38.640
possibly even still secret, so that you can't even find out about them — but on the other hand

704
00:49:38.640 --> 00:49:42.559
it's an efficient system. It's reliable, and people want to put in their paper

705
00:49:42.559 --> 00:49:46.760
the name of the Chamber of Commerce or some equivalent, so that's their

706
00:49:46.760 --> 00:49:51.960
right. And in a way this kind of, like, commercial, commercial-smelling

707
00:49:51.960 --> 00:49:55.799
legal system too can be almost, like, already, in this kind of situation, better than

708
00:49:55.799 --> 00:49:58.839
this kind of legal system. Mm. Or I don't know how much you see

709
00:49:58.839 --> 00:50:02.559
of it, that it's written straight into the contracts. It's not necessarily wanted

710
00:50:02.559 --> 00:50:06.480
that you go, like, through this three-tier legal system, since it's

711
00:50:06.480 --> 00:50:08.200
expensive. Yeah. Yes, it's, like, the prevailing

712
00:50:08.200 --> 00:50:12.359
practice in commercial contracts, that, that arbitration

713
00:50:12.359 --> 00:50:17.760
procedure is then the dispute resolution method, since there really are many, many

714
00:50:17.760 --> 00:50:22.720
problems there, I mean, like, from companies' point of view, in that kind of normal court

715
00:50:22.720 --> 00:50:27.240
proceedings. I mean, public-

716
00:50:27.240 --> 00:50:31.440
-ness itself can be a problem, and then processing times

717
00:50:31.440 --> 00:50:35.640
for example, so, uh, that's why these, in a way, like, commercial

718
00:50:35.640 --> 00:50:40.440
dispute resolution procedures really are, like, the prevailing practice. Yeah, I was that

719
00:50:40.440 --> 00:50:45.880
Nordic Trust managing director in Finland, and that Norwegian, uh, business partner was, yeah, FF

720
00:50:45.880 --> 00:50:50.799
said once, kind of oddly, I mean, uh, that his, uh, had been

721
00:50:50.799 --> 00:50:55.920
on staff at the court, uh, that there, like, they're that commercially

722
00:50:55.920 --> 00:51:00.599
specialized judging work, and when, like, in a way, when that system is run

723
00:51:00.599 --> 00:51:03.880
there on the public side, and with smart people, then it works, that, that

724
00:51:03.880 --> 00:51:07.119
then he, like, was a bit puzzled by this, Finland's, this system, that

725
00:51:07.119 --> 00:51:11.640
in a way we have kind of all the smart people, uh, on the private side, and then

726
00:51:11.640 --> 00:51:17.000
the public system is, like, somehow crumpled up, and maybe he's not thinking wrong

727
00:51:17.000 --> 00:51:20.319
and it's maybe not their fault, but somehow this is a bit lame, this Finnish

728
00:51:20.319 --> 00:51:24.880
system. Mm. Uh, well, I don't know, uh, I'm not, I'm not myself a

729
00:51:24.880 --> 00:51:29.119
lawyer, but I've glanced at a few contracts. Let's take here now this kind of

730
00:51:29.119 --> 00:51:33.520
temptation still, to finish, since you're then working at Castrén as one of Finland's

731
00:51:33.520 --> 00:51:37.720
top lawyers, so, uh, has your

732
00:51:37.720 --> 00:51:43.960
in a way, that work organization changed — that you still have that, Mert already, uh,

733
00:51:43.960 --> 00:51:47.400
retired, [clears throat] but, uh, capital markets, company sales,

734
00:51:47.400 --> 00:51:52.200
dispute resolution — has this, like, your, uh,

735
00:51:52.200 --> 00:51:56.960
division of labor changed here? Well no, no, not as such — yes, yes, we do have

736
00:51:56.960 --> 00:52:02.119
like a lot, a lot, like, in a way, the largest number of different practice areas or

737
00:52:02.119 --> 00:52:06.799
sub-practices and teams, but, but the thing is, that on assignments, indeed

738
00:52:06.799 --> 00:52:12.799
very close cooperation happens, so those, those don't form any boundaries, the ones where

739
00:52:12.799 --> 00:52:16.319
teams are, but, well, in expert work, in a certain way, has

740
00:52:16.319 --> 00:52:20.319
been seen more broadly too, that it is, is in a certain way good, that there are these kinds of

741
00:52:20.319 --> 00:52:24.240
like, like, teams built around those certain areas of expertise, where

742
00:52:24.240 --> 00:52:28.799
then also, like, that expertise gets developed, in a way, and you're able

743
00:52:28.799 --> 00:52:34.799
then always, always, like, to know who the right people are

744
00:52:34.799 --> 00:52:41.720
for any given assignment. But as such, as such, that, like, that work structure has

745
00:52:41.720 --> 00:52:47.119
stayed as such the same, even though a lot, a lot of change has happened here, and

746
00:52:47.119 --> 00:52:51.960
is happening because of AI. Of course it's not the first

747
00:52:51.960 --> 00:52:55.880
technological upheaval during my career, that I

748
00:52:55.880 --> 00:52:59.680
have often said, that when I started my legal career, then, then

749
00:52:59.680 --> 00:53:06.960
back then, letters were sent, and books were ordered from libraries, and, and

750
00:53:06.960 --> 00:53:11.440
uh, or you went to libraries, where there were legal sources, law books, and

751
00:53:11.440 --> 00:53:15.880
all other legal literature, and case law, and so on. So now

752
00:53:15.880 --> 00:53:19.680
already before AI, all legal sources are, like, right here all the time,

753
00:53:19.680 --> 00:53:25.440
on hand. 24/7. You don't need, don't need any, any, uh,

754
00:53:25.440 --> 00:53:29.599
anything else, nothing else is now, like, basically needed in order to be able to

755
00:53:29.599 --> 00:53:33.880
look up legal sources and cases, and to give, based on them,

756
00:53:33.880 --> 00:53:38.400
like, your own views. But AI is of course still one big

757
00:53:38.400 --> 00:53:42.319
and rapidly happening leap, quite, quite then to a certain,

758
00:53:42.319 --> 00:53:47.200
again new level. Yeah, I'm now, uh, Translink's head of AI, and I have

759
00:53:47.200 --> 00:53:52.160
brought AI into these, uh, certain processes of Translink's, like,

760
00:53:52.160 --> 00:53:55.520
automation's scope, but in that context

761
00:53:55.520 --> 00:53:59.960
so then, I've been sent here a lot of, like, AI startups, which

762
00:53:59.960 --> 00:54:05.799
in their own view try to challenge, uh, uh, Legora and others, but, uh, well one

763
00:54:05.799 --> 00:54:10.680
was quite interesting, this kind of, like, [unclear], so I installed

764
00:54:10.680 --> 00:54:15.559
it in a way, uh, that it was this kind of, uh, a multi-, like, agent, uh, [causal]

765
00:54:15.559 --> 00:54:20.760
type thing for contract documents, which then, uh, so, for legal

766
00:54:20.760 --> 00:54:25.680
documents then produced markup comments or other, other stuff. It

767
00:54:25.680 --> 00:54:29.760
was quite interesting. I also ran it, uh, on Finlex, like, so that I

768
00:54:29.760 --> 00:54:33.559
could get it run straight from there, uh, with this kind of MCP server,

769
00:54:33.559 --> 00:54:37.319
like, Finnish law and the Supreme Court's decisions, so you don't have to pay

770
00:54:37.319 --> 00:54:41.000
anything to some, uh, information aggregator — so yes, there really are, like,

771
00:54:41.000 --> 00:54:45.559
these kinds of, uh, quite good shortcuts even for non-lawyers, but it's

772
00:54:45.559 --> 00:54:49.000
still, I mean, at that stage I wouldn't, like, dare to let out any even slightly more important

773
00:54:49.000 --> 00:54:53.000
document, like, without, uh, a real lawyer's, uh, eye on it, that

774
00:54:53.000 --> 00:54:56.720
that there are, after all, then, uh, those assumptions, and then

775
00:54:56.720 --> 00:55:01.892
you never quite know how that, say now, Finlex's and these, like, uh,

776
00:55:01.892 --> 00:55:05.119
[sigh] Supreme Court's decisions, this

777
00:55:05.119 --> 00:55:08.720
harmony works together, and whether — have I now really found every single

778
00:55:08.720 --> 00:55:11.760
decision that affects that case, or whatever,

779
00:55:11.760 --> 00:55:15.839
but it really is moving forward fast, and, and, uh, there are, are, like, here

780
00:55:15.839 --> 00:55:19.839
these kinds of free sources — a lot of them have come out.

781
00:55:19.839 --> 00:55:26.359
Yeah, indeed. And truly, like, from today's lawyer, in a way,

782
00:55:26.359 --> 00:55:30.240
still, as before, maybe it's even emphasized more, that you also have to understand

783
00:55:30.240 --> 00:55:34.280
that big picture, and those, those principles, that

784
00:55:34.280 --> 00:55:38.760
are, like, behind the regulation, or somehow behind case law, so that

785
00:55:38.760 --> 00:55:45.079
you can efficiently also use these, these various tools, and are able

786
00:55:45.079 --> 00:55:48.440
like, are able to, like, direct their use

787
00:55:48.440 --> 00:55:52.640
and then can also, like, supervise that this makes sense, and if there's something

788
00:55:52.640 --> 00:55:58.280
then, then, uh, that, yes, it, it, there, like, the lawyer's

789
00:55:58.280 --> 00:56:02.880
job, job description is, like, changing, so, in my opinion, all the

790
00:56:02.880 --> 00:56:07.640
time more toward that, like, high-end direction. Indeed, like,

791
00:56:07.640 --> 00:56:12.319
many law firms, big international law firms have

792
00:56:12.319 --> 00:56:16.680
emphasized in their work, for years, this kind of, as it were, high-end advisory work,

793
00:56:16.680 --> 00:56:20.839
but it, it isn't going to decrease at all — on the contrary. It's going to, still,

794
00:56:20.839 --> 00:56:25.240
even more, like, become emphasized, so that you can. So there's this kind of, like, deep

795
00:56:25.240 --> 00:56:30.400
deep expertise, and, and insight, which, which isn't, like, which, which isn't that kind of

796
00:56:30.400 --> 00:56:34.160
like, mere surface, surface-level knowledge, and on top of that comes, comes

797
00:56:34.160 --> 00:56:38.039
then all these, all these, like, efficiency and also quality

798
00:56:38.039 --> 00:56:42.200
quality improvements, which many technologies in turn provide, which all

799
00:56:42.200 --> 00:56:46.599
the time keep developing. Yeah, good. And, uh, Jan N Ollila said

800
00:56:46.599 --> 00:56:50.599
about this, my new negotiation mandate, once kind of funnily, that, uh, Sami

801
00:56:50.599 --> 00:56:53.920
you, uh, probably think here, as an investment banker, that the legal

802
00:56:53.920 --> 00:56:57.480
agreement is, uh, this kind of, like, drafting of a commercial plan,

803
00:56:57.480 --> 00:57:01.240
where, like, through signing you go to closing, and then some post-game

804
00:57:01.240 --> 00:57:06.039
through their, like, reps and warranties. Yeah, that's exactly how I think about it, but, uh,

805
00:57:06.039 --> 00:57:10.880
a lawyer also sees this, like, uh, that Lord of the Rings-ish world — hasn't he said this

806
00:57:10.880 --> 00:57:14.599
— but that you see in the contract the clauses that, that you can

807
00:57:14.599 --> 00:57:16.824
use when there's disagreement.

808
00:57:16.824 --> 00:57:19.559
[scoff] [clears throat] Then, say, comes that

809
00:57:19.559 --> 00:57:24.559
post-deal, uh, uh, disappointment, and, say, something doesn't work

810
00:57:24.559 --> 00:57:28.039
at all, and you'd have to, say, cancel the whole deal, so what tools do you have

811
00:57:28.039 --> 00:57:29.920
available — well, AI [scoff]

812
00:57:29.920 --> 00:57:33.119
brings, like, these kinds of scary possibilities, that people, uh,

813
00:57:33.119 --> 00:57:36.880
who don't really have, say, skin in the game in Finnish society, then

814
00:57:36.880 --> 00:57:40.280
let's take, say, now, some cold American capitalist, well they

815
00:57:40.280 --> 00:57:44.440
can just blurt out that AI said with some 3% probability we can get

816
00:57:44.440 --> 00:57:47.559
this deal cancelled. And let's file, uh,

817
00:57:47.559 --> 00:57:52.559
a dispute, so, uh, that AI work also does these kinds of, like, of course from those then

818
00:57:52.559 --> 00:57:57.359
some Finnish lawyer might bill quite a lot, but, uh, what happens is that

819
00:57:57.359 --> 00:58:01.079
the cost of, like, uh, carrying out legal work has gone down,

820
00:58:01.079 --> 00:58:04.799
so that in a way you can, uh, like, take on a really low-probability

821
00:58:04.799 --> 00:58:08.799
case anyway, because that AI then does that, uh, cheaply, and there

822
00:58:08.799 --> 00:58:11.720
the quality doesn't matter that much either. I think this is going to become more common,

823
00:58:11.720 --> 00:58:15.480
this kind of, like, spamming, legal spamming. I don't know if you're already seeing

824
00:58:15.480 --> 00:58:20.319
a bit of this — well yeah, I mean, you do see some of it

825
00:58:20.319 --> 00:58:23.280
to some extent, you can see it in what's been reported publicly too, that

826
00:58:23.280 --> 00:58:27.960
appeals or other things get made, that they're able, like, to file. But then also

827
00:58:27.960 --> 00:58:32.359
this kind of interesting phenomenon, that, that, uh, also then in some clients'

828
00:58:32.359 --> 00:58:36.359
cases, say, it might come, like, like, AI clearly

829
00:58:36.359 --> 00:58:41.280
used, you might even get, like, like, in a way, an unnecessarily large amount of

830
00:58:41.280 --> 00:58:45.160
materials, unnecessarily extensive comments, that we then have to

831
00:58:45.160 --> 00:58:49.359
like — that sometimes this AI actually, it kind of feels like, produces for us

832
00:58:49.359 --> 00:58:53.160
extra work at times. Of course we can then also use AI in that

833
00:58:53.160 --> 00:58:56.319
analysis, but if in the old days, like, in a way, when

834
00:58:56.319 --> 00:59:01.039
there were questions from us to the client, it might have been a couple of

835
00:59:01.039 --> 00:59:05.200
couple of pages, quite concise, and then talk it over on the phone in more detail. Now

836
00:59:05.200 --> 00:59:11.520
you might get 20 or 200 pages, which as such is quite on point, but we don't, we

837
00:59:11.520 --> 00:59:15.839
have to somehow process it, in order for us to grasp it, but

838
00:59:15.839 --> 00:59:20.799
interesting, like, in a way, like, phenomena

839
00:59:20.799 --> 00:59:24.880
always, always kind of feels like, like every week or month there comes

840
00:59:24.880 --> 00:59:28.480
up something, something a bit, like, new kind of thing, just from this, this

841
00:59:28.480 --> 00:59:33.079
because of this development. Good. Thank you, Janne Juusela, for having

842
00:59:33.079 --> 00:59:37.000
watched or listened this far, so go ahead and subscribe to the channel, and

843
00:59:37.000 --> 00:59:41.559
let's move over to the [unclear] side. Let's talk a bit more about this, uh,

844
00:59:41.559 --> 00:59:46.166
legislative drafting, and indeed, like I said, my fine moment was this, uh,

845
00:59:46.166 --> 00:59:50.039
[music] drafting this [unclear], as well as, uh,

846
00:59:50.039 --> 00:59:56.039
you're, uh, active over on that side, so let's continue with a few more words

847
00:59:56.039 --> 00:59:57.839
on the insider [music] side. Thank you.

848
00:59:57.839 --> 01:00:00.599
Thank you. M.