The Finnish government unveiled a far-reaching tax reform today as part of its 2025 mid-term budget, aiming to spark private investment and simultaneously underwrite rising defence outlays. Under the plan championed by Prime Minister Petteri Orpo’s coalition, the headline corporate tax rate will fall by two percentage points to 18%, while personal income levies will be cut by €1.1 billion overall. As a result, Finland’s top marginal income tax rate will decrease from just under 60% to 52% a move Orpo says will position the country as “one of the most attractive in Europe for investment.”
The tax reductions come as Finland accelerates its Nato-aligned defence ambitions, targeting military spending equivalent to 3% of GDP by 2029, up from the current 2.4%. To bankroll the package without immediate tax hikes elsewhere, the government will draw on reserves in the national pension fund. However, the approach drives Finland’s public deficit to a projected €12.3 billion, or 4.4% of GDP well above the EU’s 3% ceiling. Opposition parties have decried the higher borrowing as a risky fiscal slippage, but Orpo’s coalition argues that short-term deficits are a necessary trade-off to secure long-term competitiveness and bolster national security in an uncertain geopolitical climate.
Economists warn that sustaining elevated deficits could pressure Finland’s credit metrics, yet many welcome the reforms’ growth focus. Business groups have praised the lower corporate levy as a catalyst for new plant investment and headcount expansion, while high-earners stand to retain a larger share of their incomes. As lawmakers prepare parliamentary debates in the coming weeks, the government insists that annual budgets will rapidly realign closer to balance once growth revives and defence outlays plateau. For now, Finland has staked its economic and security future on a bold tax gamble.
