Economic Sustainability
#2Key Findings
Finland falls into the top group internationally (rank 2) in the category of economic sustainability.
Finland was first country to create a national circular economy road map, but the think tank-produced document is not binding. The country is a leader in promoting critical infrastructure resilience, with efforts led by sectoral ministries and public-private partnerships.
The country’s binding climate targets are among the most ambitious globally. Employment rates are high, though unemployment persists in some demographic groups. The state allocates significant resources to active labor market policies, with reforms underway to enhance their impact.
Tax rates are high due to the comprehensive public healthcare, social security and education systems. However, the public broadly supports this tradeoff. The corporate tax rate is relatively low compared to other Nordic countries. Debt levels have climbed in recent years. While Finland was once a leader in R&D spending, its position has declined due to economic challenges.
Finland was first country to create a national circular economy road map, but the think tank-produced document is not binding. The country is a leader in promoting critical infrastructure resilience, with efforts led by sectoral ministries and public-private partnerships.
The country’s binding climate targets are among the most ambitious globally. Employment rates are high, though unemployment persists in some demographic groups. The state allocates significant resources to active labor market policies, with reforms underway to enhance their impact.
Tax rates are high due to the comprehensive public healthcare, social security and education systems. However, the public broadly supports this tradeoff. The corporate tax rate is relatively low compared to other Nordic countries. Debt levels have climbed in recent years. While Finland was once a leader in R&D spending, its position has declined due to economic challenges.
Graph View
Graph View
How committed is the government to driving the transition toward a circular economy?
10
9
9
The government is clearly committed to transitioning to a circular economy.
8
7
6
7
6
The government is largely committed to transitioning to a circular economy.
5
4
3
4
3
The government is somewhat committed to transitioning to a circular economy.
2
1
1
The government is not at all committed to transitioning to a circular economy.
In 2016, Finland became the first country globally to develop a national road map to a circular economy, led by the government-backed Sitra Finnish Innovation Fund (Sitra n.d.), a think tank. The updated version, released in March 2019, builds on the original by incorporating essential circular economy measures that various Finnish stakeholders have committed to. These measures span the state administration, municipalities, businesses and the daily lives of the Finnish population. The road map introduces nearly 30 new actions and outlines measures yet to be implemented that do not fall under the responsibility of any specific organization. The publication highlights effective circular economy measures and solutions proposed by Finland to address challenges such as climate change, resource depletion and urbanization. Road Map 2.0 refines the vision and strategic objectives, and updates the solutions based on evolving needs.
With its national road map, Finland aims to lead the way in a global shift where economic competitiveness and well-being no longer rely on the inefficient use of natural resources. Instead of focusing solely on product offerings, the emphasis will be on services, product recycling and intelligence-based digital solutions. Finland sees a significant opportunity to pioneer a transition toward a carbon-neutral circular economy and low-emission solutions.
The road map represents a collaborative effort across the entire nation, capturing key stakeholders’ perspectives on necessary changes and actions for transitioning to a circular economy. The strategy and designated policies regarding the goals of reduction, endurance, reuse and recycling are comprehensive. Engagement with the road map involves diverse stakeholders, including government ministries and representatives from the public, private and third sectors. For the second version, Sitra gathered ideas and comments, organized events and conducted interviews with specialists. A draft of the road map was open for public feedback, with contributions welcomed from all Finnish citizens.
It is important to emphasize that the road map was developed by a think tank, not by the government. It is therefore not binding. Beyond Sitra, existing policies may not fully support efforts to transition to a circular economy. For example, public procurement is not completely aligned with the circular economy strategy. However, since the publication of the original road map, Finland has seen the circular economy gain prominence in public discourse, and the proposals have been translated into practical actions.
Sitra is not a government agency and does not have the capacity to effectively coordinate or facilitate interministerial policy collaboration.
Citations:
Finnish Innovation Fund Sitra. n.d. “Finnish Road Map to a Circular Economy 2016-2025.” https://www.sitra.fi/en/projects/leading-the-cycle-finnish-road-map-to-a-circular-economy-2016-2025/#what-is-it-about
With its national road map, Finland aims to lead the way in a global shift where economic competitiveness and well-being no longer rely on the inefficient use of natural resources. Instead of focusing solely on product offerings, the emphasis will be on services, product recycling and intelligence-based digital solutions. Finland sees a significant opportunity to pioneer a transition toward a carbon-neutral circular economy and low-emission solutions.
The road map represents a collaborative effort across the entire nation, capturing key stakeholders’ perspectives on necessary changes and actions for transitioning to a circular economy. The strategy and designated policies regarding the goals of reduction, endurance, reuse and recycling are comprehensive. Engagement with the road map involves diverse stakeholders, including government ministries and representatives from the public, private and third sectors. For the second version, Sitra gathered ideas and comments, organized events and conducted interviews with specialists. A draft of the road map was open for public feedback, with contributions welcomed from all Finnish citizens.
It is important to emphasize that the road map was developed by a think tank, not by the government. It is therefore not binding. Beyond Sitra, existing policies may not fully support efforts to transition to a circular economy. For example, public procurement is not completely aligned with the circular economy strategy. However, since the publication of the original road map, Finland has seen the circular economy gain prominence in public discourse, and the proposals have been translated into practical actions.
Sitra is not a government agency and does not have the capacity to effectively coordinate or facilitate interministerial policy collaboration.
Citations:
Finnish Innovation Fund Sitra. n.d. “Finnish Road Map to a Circular Economy 2016-2025.” https://www.sitra.fi/en/projects/leading-the-cycle-finnish-road-map-to-a-circular-economy-2016-2025/#what-is-it-about
Graph View
How committed is the government to updating and protecting critical infrastructure?
10
9
9
The government is clearly committed to updating basic technical infrastructure.
8
7
6
7
6
The government is largely committed to updating basic technical infrastructure.
5
4
3
4
3
The government is somewhat committed to updating basic technical infrastructure.
2
1
1
The government is not at all committed to updating basic technical infrastructure.
According to the OECD (2019), Finland has been at the forefront of promoting resilience in its critical infrastructure for the past decade. With an ambitious objective to become the safest country in Europe, Finland’s strategic framework for risk governance closely aligns with the OECD Recommendation on the Governance of Critical Risks.
Since 2010, the National Risk Assessment has been a crucial component supporting the comprehensive Security Strategy for Society, which places vital functions at its core. This strategy influenced the 2013 Government Decision on Security of Supply Goals. It aims to ensure the continuity of economic activities and the functionality of critical infrastructure during severe disruptions and emergencies. The critical infrastructure services identified include energy, data communication systems, financial services, transport and logistics, water supply, construction and maintenance, and waste management.
Finland’s strategic approach designates sectoral ministries as leaders in ensuring the resilience of critical infrastructure and emphasizes collaboration through public-private partnerships. The Security of Supply strategy aligns national preparedness principles while also outlining clear roles and responsibilities across various government branches, including at the local level.
This comprehensive strategy underscores the significance of partnerships, well-functioning markets and regulations in achieving critical infrastructure resilience. To facilitate the implementation of these policies, the National Emergency Supply Organization (NESO) serves as a pivotal platform for public and private cooperation. NESO brings together industry and government in sector-specific groups to develop a shared understanding of critical infrastructure risks, vulnerabilities and practical preparedness measures.
Placed under the Ministry of Economic Affairs and Employment, the National Emergency Supply Agency (NESA) plays a central role in conducting risk analysis, coordinating information-sharing, promoting public-private cooperation and mainstreaming the security of supply policies in critical sectors. With over a thousand participating companies in the pooling system, NESA is widely recognized by its stakeholders as an effective governance mechanism for critical infrastructure resilience.
Currently, there is a legislative initiative to bolster national security and enhance societal resilience. The project aims to transpose the directive issued by the European Parliament and the European Council on the resilience of critical entities, which came into effect in January 2023, into national law (Ministry of the Interior n.d.). This involves a comprehensive review and development of both critical infrastructure and its regulatory framework based on national requirements. The ongoing conflict with Russia in Ukraine and significant shifts in the security landscape have heightened the urgency in safeguarding critical infrastructure and reinforcing its resilience.
As part of this strategy, the Critical Entities Resilience Directive introduces new obligations for Finland, necessitating the identification and supervision of critical entities. Finland, which has not yet defined its national critical infrastructure legislatively, is now required to do so. The directive spans 11 sectors: energy, transport, banking, financial market infrastructure, health, food, drinking water, wastewater, digital infrastructure, public administration and space.
In response to a government report on changes in the security environment submitted to parliament in spring 2022, a legislative project was initiated to propose legislation designed to strengthen the resilience of critical infrastructure. Ministries have since reviewed existing national legislation and identified areas for improvement in official duties, leading to the need for centralized organization under the government.
The project, established on 7 December 2022, is scheduled to continue until 31 December 2024. A steering group led by the permanent secretary of the Ministry of the Interior has been appointed to oversee the project, drawing on the expertise of various ministries. The project will encompass multiple agency functions, with a dedicated expert group assessing the current situation and contributing to the development of new legislation and crisis resilience support and supervision models. Experts from key agencies such as the National Emergency Supply Agency, the Finnish Transport and Communications Agency (Traficom), the Energy Authority, and the National Land Survey of Finland will be involved in the project on an ongoing basis.
Citations:
OECD. 2019. Good Governance for Critical Infrastructure Resilience. Paris: OECD Publishing. https://doi.org/10.1787/02f0e5a0-en
Ministry of the Interior. n.d. “Reform of the Regulation of Critical Infrastructure.” https://intermin.fi/en/project/critical-infrastructure
Since 2010, the National Risk Assessment has been a crucial component supporting the comprehensive Security Strategy for Society, which places vital functions at its core. This strategy influenced the 2013 Government Decision on Security of Supply Goals. It aims to ensure the continuity of economic activities and the functionality of critical infrastructure during severe disruptions and emergencies. The critical infrastructure services identified include energy, data communication systems, financial services, transport and logistics, water supply, construction and maintenance, and waste management.
Finland’s strategic approach designates sectoral ministries as leaders in ensuring the resilience of critical infrastructure and emphasizes collaboration through public-private partnerships. The Security of Supply strategy aligns national preparedness principles while also outlining clear roles and responsibilities across various government branches, including at the local level.
This comprehensive strategy underscores the significance of partnerships, well-functioning markets and regulations in achieving critical infrastructure resilience. To facilitate the implementation of these policies, the National Emergency Supply Organization (NESO) serves as a pivotal platform for public and private cooperation. NESO brings together industry and government in sector-specific groups to develop a shared understanding of critical infrastructure risks, vulnerabilities and practical preparedness measures.
Placed under the Ministry of Economic Affairs and Employment, the National Emergency Supply Agency (NESA) plays a central role in conducting risk analysis, coordinating information-sharing, promoting public-private cooperation and mainstreaming the security of supply policies in critical sectors. With over a thousand participating companies in the pooling system, NESA is widely recognized by its stakeholders as an effective governance mechanism for critical infrastructure resilience.
Currently, there is a legislative initiative to bolster national security and enhance societal resilience. The project aims to transpose the directive issued by the European Parliament and the European Council on the resilience of critical entities, which came into effect in January 2023, into national law (Ministry of the Interior n.d.). This involves a comprehensive review and development of both critical infrastructure and its regulatory framework based on national requirements. The ongoing conflict with Russia in Ukraine and significant shifts in the security landscape have heightened the urgency in safeguarding critical infrastructure and reinforcing its resilience.
As part of this strategy, the Critical Entities Resilience Directive introduces new obligations for Finland, necessitating the identification and supervision of critical entities. Finland, which has not yet defined its national critical infrastructure legislatively, is now required to do so. The directive spans 11 sectors: energy, transport, banking, financial market infrastructure, health, food, drinking water, wastewater, digital infrastructure, public administration and space.
In response to a government report on changes in the security environment submitted to parliament in spring 2022, a legislative project was initiated to propose legislation designed to strengthen the resilience of critical infrastructure. Ministries have since reviewed existing national legislation and identified areas for improvement in official duties, leading to the need for centralized organization under the government.
The project, established on 7 December 2022, is scheduled to continue until 31 December 2024. A steering group led by the permanent secretary of the Ministry of the Interior has been appointed to oversee the project, drawing on the expertise of various ministries. The project will encompass multiple agency functions, with a dedicated expert group assessing the current situation and contributing to the development of new legislation and crisis resilience support and supervision models. Experts from key agencies such as the National Emergency Supply Agency, the Finnish Transport and Communications Agency (Traficom), the Energy Authority, and the National Land Survey of Finland will be involved in the project on an ongoing basis.
Citations:
OECD. 2019. Good Governance for Critical Infrastructure Resilience. Paris: OECD Publishing. https://doi.org/10.1787/02f0e5a0-en
Ministry of the Interior. n.d. “Reform of the Regulation of Critical Infrastructure.” https://intermin.fi/en/project/critical-infrastructure
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
10
9
9
The government is clearly committed to transitioning to a decarbonized energy system.
8
7
6
7
6
The government is largely committed to transitioning to a decarbonized energy system.
5
4
3
4
3
The government is somewhat committed to transitioning to a decarbonized energy system.
2
1
1
The government is not at all committed to transitioning to a decarbonized energy system.
According to the IEA (2023), Finland has established one of the most ambitious climate targets globally, legally committing to achieving carbon neutrality by 2035 as mandated by the updated Climate Change Act of July 2022. The act sets binding targets to reduce greenhouse gas emissions by 60% by 2030, 80% by 2040 and 90% to 95% by 2050, excluding land use changes.
Substantial progress has been made toward this goal, marked by the deployment of Europe’s first new nuclear reactor in over 15 years and a significant expansion of wind energy generation. As a result of these advancements, Finland boasts the second-lowest proportion of fossil fuels in its energy supply among IEA members. Finland is actively decreasing its dependence on Russian energy imports, enhancing energy security by augmenting imports from other nations, increasing domestic renewable energy production and improving overall energy efficiency.
Despite considerable achievements in the fields of clean energy and energy security, notable challenges persist. Imported fossil fuels still constitute more than a third of the energy supply, and certain sectors of the Finnish economy, such as transportation and key industrial activities, continue to rely on fossil fuels. Additionally, land use change and forestry, which have traditionally acted as a substantial offset for greenhouse gas emissions, became a net source of emissions for the first time in 2021.
The National Climate and Energy Strategy (NCES) outlines Finland’s plan to achieve carbon neutrality, emphasizing nuclear energy, renewable electricity, heat production, energy efficiency and electrification. Energy efficiency, especially in industry, is crucial. Finland aims to increase renewable energy deployment, particularly from onshore wind and solar plants. The focus is also on developing and commercializing new energy technologies for sectors in which decarbonization is difficult. Finland intends to enhance its role in the global battery supply chain, utilizing its significant deposits of critical minerals.
Finland aims to reduce reliance on Russian energy imports, increase energy security and decrease natural gas use. Energy efficiency measures, electrification and renewable energy growth are pivotal, along with reductions in the amount of oil consumed in the transport sector. The electricity sector – dominated by nuclear energy – plays a vital role, and Finland is investing in low-carbon generation. Peat’s role is diminishing, and efforts are being made to reduce its usage.
The strategy and road map to facilitate the transition toward a fully decarbonized energy system by 2050 are included in the National Climate and Energy Strategy, which has clearly defined targets. The strategy is binding as it relates to climate targets expressed in law. There are political consequences if targets are missed. However, it is not clear what the consequences would be for ministers.
As explained above, the overall strategy has been broken down into sector-specific action plans, which are aligned with the overall targets. The only policies that undermine the goal of a decarbonized energy system include subsidies to peat production; however, there are plans for phasing out peat production.
Public procurement is not currently a topic of discussion in connection with the energy transition strategy.
Citations:
IEA. 2023. Finland 2023 Energy Policy Review. Paris: OECD Publishing. https://doi.org/10.1787/d435fa51-en
Substantial progress has been made toward this goal, marked by the deployment of Europe’s first new nuclear reactor in over 15 years and a significant expansion of wind energy generation. As a result of these advancements, Finland boasts the second-lowest proportion of fossil fuels in its energy supply among IEA members. Finland is actively decreasing its dependence on Russian energy imports, enhancing energy security by augmenting imports from other nations, increasing domestic renewable energy production and improving overall energy efficiency.
Despite considerable achievements in the fields of clean energy and energy security, notable challenges persist. Imported fossil fuels still constitute more than a third of the energy supply, and certain sectors of the Finnish economy, such as transportation and key industrial activities, continue to rely on fossil fuels. Additionally, land use change and forestry, which have traditionally acted as a substantial offset for greenhouse gas emissions, became a net source of emissions for the first time in 2021.
The National Climate and Energy Strategy (NCES) outlines Finland’s plan to achieve carbon neutrality, emphasizing nuclear energy, renewable electricity, heat production, energy efficiency and electrification. Energy efficiency, especially in industry, is crucial. Finland aims to increase renewable energy deployment, particularly from onshore wind and solar plants. The focus is also on developing and commercializing new energy technologies for sectors in which decarbonization is difficult. Finland intends to enhance its role in the global battery supply chain, utilizing its significant deposits of critical minerals.
Finland aims to reduce reliance on Russian energy imports, increase energy security and decrease natural gas use. Energy efficiency measures, electrification and renewable energy growth are pivotal, along with reductions in the amount of oil consumed in the transport sector. The electricity sector – dominated by nuclear energy – plays a vital role, and Finland is investing in low-carbon generation. Peat’s role is diminishing, and efforts are being made to reduce its usage.
The strategy and road map to facilitate the transition toward a fully decarbonized energy system by 2050 are included in the National Climate and Energy Strategy, which has clearly defined targets. The strategy is binding as it relates to climate targets expressed in law. There are political consequences if targets are missed. However, it is not clear what the consequences would be for ministers.
As explained above, the overall strategy has been broken down into sector-specific action plans, which are aligned with the overall targets. The only policies that undermine the goal of a decarbonized energy system include subsidies to peat production; however, there are plans for phasing out peat production.
Public procurement is not currently a topic of discussion in connection with the energy transition strategy.
Citations:
IEA. 2023. Finland 2023 Energy Policy Review. Paris: OECD Publishing. https://doi.org/10.1787/d435fa51-en
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
10
9
9
Labor market institutions are fully aligned with the goal of an adaptable labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an adaptable labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
Over the last decade, Finland has maintained a robust labor market with high participation and employment rates. In 2022, these were respectively 79.3% and 73.8%, surpassing the corresponding figures in many OECD countries. Despite a relatively strong recovery in employment following the pandemic, the unemployment rate stood at 6.9% in 2022, which is comparatively high within the OECD. Notably, about one in four unemployed individuals in 2021 had remained jobless for over a year, and 6.8% of the labor force not actively seeking work indicated that they would accept job offers.
Existing policies and regulations encourage and empower people to develop their skills throughout their working life in response to changing labor market demands. However, there is no special emphasis on incentivizing employers to anticipate sustainability challenges in the labor market and invest in upskilling or reskilling their workforces. The unemployment program has long been applied to short-term layoffs, allowing firms to absorb short-term economic shocks by implementing short-time work schemes. Prime Minister Orpo’s government has proposed a discontinuation of the adult education allowance, thus weakening financial incentives for reskilling or professional reorientation for adults with degrees.
Ongoing reforms aim to improve active labor market policy (ALMP) measures by focusing on job-search obligations, expanding support and shifting responsibilities to municipalities. The country’s significant ALMP spending, particularly on training (0.36% of GDP), seeks to foster adult learning, address labor shortages and facilitate labor market transitions. According to OECD (2023), evaluating the effectiveness of these programs, specifically labor market training (LMT) and self-motivated education with unemployment benefits (SMT), is crucial.
Services provided by employment agencies facilitate worker mobility across firms, industries and regions through upskilling and reskilling training. However, there are no policies to support mobility across countries. Employment office authorities develop integrated action plans jointly with claimants. The intensity and content of these plans vary based on individual needs. In principle, the measures include several components such as labor market training, self-motivated studies, part-time work, preparatory work training, on-the-job training, integration measures for immigrants and various types of rehabilitative work activities.
Citations:
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing. https://doi.org/10.1787/115b186e-en
Kantola, Anu and Kananen, Johannes. 2013. “Seize the Moment: Financial Crises and the Making of the Finnish Competition State.” New Political Economy 18(6): 811-826.
Existing policies and regulations encourage and empower people to develop their skills throughout their working life in response to changing labor market demands. However, there is no special emphasis on incentivizing employers to anticipate sustainability challenges in the labor market and invest in upskilling or reskilling their workforces. The unemployment program has long been applied to short-term layoffs, allowing firms to absorb short-term economic shocks by implementing short-time work schemes. Prime Minister Orpo’s government has proposed a discontinuation of the adult education allowance, thus weakening financial incentives for reskilling or professional reorientation for adults with degrees.
Ongoing reforms aim to improve active labor market policy (ALMP) measures by focusing on job-search obligations, expanding support and shifting responsibilities to municipalities. The country’s significant ALMP spending, particularly on training (0.36% of GDP), seeks to foster adult learning, address labor shortages and facilitate labor market transitions. According to OECD (2023), evaluating the effectiveness of these programs, specifically labor market training (LMT) and self-motivated education with unemployment benefits (SMT), is crucial.
Services provided by employment agencies facilitate worker mobility across firms, industries and regions through upskilling and reskilling training. However, there are no policies to support mobility across countries. Employment office authorities develop integrated action plans jointly with claimants. The intensity and content of these plans vary based on individual needs. In principle, the measures include several components such as labor market training, self-motivated studies, part-time work, preparatory work training, on-the-job training, integration measures for immigrants and various types of rehabilitative work activities.
Citations:
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing. https://doi.org/10.1787/115b186e-en
Kantola, Anu and Kananen, Johannes. 2013. “Seize the Moment: Financial Crises and the Making of the Finnish Competition State.” New Political Economy 18(6): 811-826.
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
10
9
9
Labor market institutions are fully aligned with the goal of an inclusive labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an inclusive labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
A deep depression in the Finnish economy in the 1990s led to a rapid and dramatic increase in unemployment rates. While the employment situation gradually improved after this recession, unemployment again became a serious challenge following the global economic and financial crisis. Unemployment rates partially recovered after the COVID-19 era, but still remain higher than in the early 1990s.
Labor market disparities persist across demographic groups, with higher unemployment rates observed among youth, older individuals, men and those with lower education levels. While Finland allocates 0.86% of GDP to active labor market policies – nearly double the OECD average of 0.45% – challenges include underutilization of public employment services (PES), with only 44% of job seekers contacting PES in 2020.
Finland is known for its tradition of using active labor market policies to address the adverse impacts of economic crises on employment. The Finnish service repertoire for long-term unemployed individuals is geared toward individualized support and tailored to the needs of each claimant (Kangas and Kalliomaa-Puha 2015).
Immigrant claimants participating in activation measures or registered as jobseekers can be required to take a Swedish or Finnish language course. Young people below the age of 25 are obligated to apply for a secondary education study slot if they have not already completed this level of education. The policies and regulations in Finland combine accessible out-of-work benefits with active labor market programs to safeguard workers and improve the possibilities of finding a job.
These policies aim to incentivize groups to enter or reenter employment or increase working hours by addressing barriers to employment. Special policies target the proportion of young people not in employment, education or training. NEETs are not allowed to claim unemployment compensation if they have not completed a secondary degree or if they do not apply for a study place in an educational program leading to a secondary degree.
Policies and regulations that help workers achieve a work-life balance, such as remote work arrangements, are decided at the company level. Family reconciliation policies for families with children are set at the national level.
Citations:
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing.
Labor market disparities persist across demographic groups, with higher unemployment rates observed among youth, older individuals, men and those with lower education levels. While Finland allocates 0.86% of GDP to active labor market policies – nearly double the OECD average of 0.45% – challenges include underutilization of public employment services (PES), with only 44% of job seekers contacting PES in 2020.
Finland is known for its tradition of using active labor market policies to address the adverse impacts of economic crises on employment. The Finnish service repertoire for long-term unemployed individuals is geared toward individualized support and tailored to the needs of each claimant (Kangas and Kalliomaa-Puha 2015).
Immigrant claimants participating in activation measures or registered as jobseekers can be required to take a Swedish or Finnish language course. Young people below the age of 25 are obligated to apply for a secondary education study slot if they have not already completed this level of education. The policies and regulations in Finland combine accessible out-of-work benefits with active labor market programs to safeguard workers and improve the possibilities of finding a job.
These policies aim to incentivize groups to enter or reenter employment or increase working hours by addressing barriers to employment. Special policies target the proportion of young people not in employment, education or training. NEETs are not allowed to claim unemployment compensation if they have not completed a secondary degree or if they do not apply for a study place in an educational program leading to a secondary degree.
Policies and regulations that help workers achieve a work-life balance, such as remote work arrangements, are decided at the company level. Family reconciliation policies for families with children are set at the national level.
Citations:
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing.
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
10
9
9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
The constitution of Finland (Chapter 19) dictates that all unemployed persons (and persons seeking employment for the first time) are covered through a social security scheme. There have also been policies to incentivize part-time work for unemployed individuals through income disregard schemes, allowing unemployment benefit claimants monthly earnings of up to €300 without any deduction in the benefit amount (Open Unemployment Fund A-kassa 2023). However, Prime Minister Orpo’s government has decided to abolish the so-called income disregard in the unemployment benefit scheme.
Trade union contribution payments are tax deductible in Finland. Collective agreements are binding on all workers, regardless of their union membership. Policies and regulations ensure the full portability of social rights, including social insurance and pensions.
Citations:
Open Unemployment Fund A-kassa. 2023. “Impact of Part-Time Work on Earnings-Related Unemployment Allowance.” https://a-kassa.fi/en/impact-of-part-time-work-on-earnings-related-unemployment-allowance
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing. https://doi.org/10.1787/115b186e-en
Trade union contribution payments are tax deductible in Finland. Collective agreements are binding on all workers, regardless of their union membership. Policies and regulations ensure the full portability of social rights, including social insurance and pensions.
Citations:
Open Unemployment Fund A-kassa. 2023. “Impact of Part-Time Work on Earnings-Related Unemployment Allowance.” https://a-kassa.fi/en/impact-of-part-time-work-on-earnings-related-unemployment-allowance
OECD. 2023. Evaluation of Active Labour Market Policies in Finland, Connecting People with Jobs. Paris: OECD Publishing. https://doi.org/10.1787/115b186e-en
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
10
9
9
The tax system is fully aligned with the goals of ensuring adequate tax revenues.
8
7
6
7
6
The tax system is largely aligned with the goals of ensuring adequate tax revenues.
5
4
3
4
3
The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
2
1
1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
In Finland, the state and municipalities have the power to levy taxes. The Evangelical Lutheran Church and the Orthodox Church are allowed to collect their membership fees through regular taxation. Taxation policies are largely effective. Taxes are generally high in Finland because the country has comprehensive healthcare and social security systems, and operates a costly education system that does not charge tuition. In general, the public has a favorable attitude toward high levels of taxation. In a recent poll, 96% of respondents agreed that taxation is an important means of maintaining the welfare state, and 79% agreed that they paid their taxes willingly.
The taxation policy of Petteri Orpo’s government is designed to enhance household spending capacity, create stronger incentives for workforce participation and contribute to the overall improvement of economic conditions. This policy aims to promote employment and self-employment while fostering a supportive environment for domestic ownership (Ministry of Finance n.d.). The government is committed to refraining from implementing discretionary measures that would raise the overall tax rate, emphasizing a strategy that encourages economic growth and individual financial empowerment. In short, the government strongly addresses possible disincentives in the tax system that may discourage individuals from seeking employment and companies from making investments.
Administrative capacities in Finland are sufficient to collect the taxes levied, and tax evasion is effectively prosecuted. Finland performs well regarding structural balance and redistributional effects. While overall taxation policies generate steady government revenue, they are insufficient to prevent state and municipal budget deficits.
Citations:
Ministry of Finance. n.d. “Fiscal Policy.” https://vm.fi/en/fiscal-policy
The taxation policy of Petteri Orpo’s government is designed to enhance household spending capacity, create stronger incentives for workforce participation and contribute to the overall improvement of economic conditions. This policy aims to promote employment and self-employment while fostering a supportive environment for domestic ownership (Ministry of Finance n.d.). The government is committed to refraining from implementing discretionary measures that would raise the overall tax rate, emphasizing a strategy that encourages economic growth and individual financial empowerment. In short, the government strongly addresses possible disincentives in the tax system that may discourage individuals from seeking employment and companies from making investments.
Administrative capacities in Finland are sufficient to collect the taxes levied, and tax evasion is effectively prosecuted. Finland performs well regarding structural balance and redistributional effects. While overall taxation policies generate steady government revenue, they are insufficient to prevent state and municipal budget deficits.
Citations:
Ministry of Finance. n.d. “Fiscal Policy.” https://vm.fi/en/fiscal-policy
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
The state taxes individual incomes at progressive rates ranging from 12.64% (for an annual taxable income of €20,500) to 44% (for an annual taxable income of €150,000) in 2024 (Vero.fi: Tax Administration n.d.). Municipal taxes vary from 4.4% to 10.8%, depending on the municipal authority. Generally speaking, demands for vertical equity are largely satisfied. However, this is less true of horizontal equity.
The corporate income tax rate was lowered in January 2014 from 24.5% to 20%, which is, on average, less than in other Nordic countries and EU member states. Adjustments in recent years have made Finland’s taxation system less complex and more transparent.
Citations:
Vero.fi: Tax Administration. n.d. “Changes in Taxation.” https://www.vero.fi/en/About-us/newsroom/changes-in-taxation/
The corporate income tax rate was lowered in January 2014 from 24.5% to 20%, which is, on average, less than in other Nordic countries and EU member states. Adjustments in recent years have made Finland’s taxation system less complex and more transparent.
Citations:
Vero.fi: Tax Administration. n.d. “Changes in Taxation.” https://www.vero.fi/en/About-us/newsroom/changes-in-taxation/
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
Tax administration in Finland has been at the forefront of digitalization. The Vero.fi Tax Administration website and MyTax e-service are the primary points of entry for information and interactions regarding tax issues for individuals and companies. It is currently possible to file tax reports online. Moreover, the tax authorities send a suggested report, and if individuals liable to pay taxes are satisfied with the suggestion, they do not need to take any further action.
Finland has also updated its income register through the tax authorities. The register includes up-to-date information on all payments for various stakeholders, including the tax authorities and social security funds.
Tax rules are transparent and easily understandable. The tax authorities have minimized compliance costs for taxpayers. These rules promote transparency and comprehensibility, reducing administrative collection costs for tax institutions and avoiding expensive tax litigation.
Citations:
Vero.fi: Tax Administration. https://www.vero.fi/en/individuals/
MyTax. https://www.vero.fi/en/e-file/mytax/
Finland has also updated its income register through the tax authorities. The register includes up-to-date information on all payments for various stakeholders, including the tax authorities and social security funds.
Tax rules are transparent and easily understandable. The tax authorities have minimized compliance costs for taxpayers. These rules promote transparency and comprehensibility, reducing administrative collection costs for tax institutions and avoiding expensive tax litigation.
Citations:
Vero.fi: Tax Administration. https://www.vero.fi/en/individuals/
MyTax. https://www.vero.fi/en/e-file/mytax/
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
In Finland, there has been no major shift away from the taxation of labor toward environmental taxation; the share of environmental taxes in tax revenues remains moderate. There are also few other taxes and subsidies introduced to internalize negative externalities. These include taxes on tobacco products and alcoholic drinks. Similarly, very few taxes and subsidies have been introduced to internalize positive externalities. For example, there are no subsidies for basic research that benefits the public, except that foundations do not need to pay tax, regardless of the field of operation of the foundation.
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
10
9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
In Finland, politicians widely recognize that the aging population – particularly the large cohort born immediately after World War II – will necessitate increased public spending to maintain the social security system and access to welfare services. Currently, there are no debt limits or debt brakes to prevent excessive public debt. Instead, at the start of each parliamentary term, the government establishes a framework specifying the maximum limit for budget expenditure and defining the rules governing the framework procedure. The spending limits, which dictate expenditure policy throughout the entire four-year term, are outlined in the initial general government fiscal plan. Each year, in March or April, the government reviews the allocation of budget resources within the established framework detailed in the General Fiscal Plan. Additionally, it adjusts the framework to accommodate changes in cost levels, prices and the structure of expenses within the scope of the spending limits (Ministry of Finance, n.d.a).
The budget process in Finland is transparent. There are no subsidiary budgets outside the normal budget. Additionally, there are no budgetary rules mandating the accumulation of financial reserves during economic expansions to boost financial capacity during times of crisis. The national budget does not explicitly address the SDGs or other transformation goals. Furthermore, there are no target values associated with expenditures for economic and social development.
The objectives of fiscal policy, outlined in Petter Orpo’s government program, influence economic structures, thus impacting citizens, households and businesses. Key decisions on taxation, social security benefits, pensions and their funding shape the nation’s economic landscape, and these choices are integral to structural social policy with lasting effects on the economy. The implementation of fiscal policy is carried out through instruments such as the general government fiscal plan and the budget.
The fiscal policy of Prime Minister Orpo’s government centers on ensuring a welfare society for future generations. The primary goal is to enhance general government finances and reverse Finland’s trend of increasing indebtedness. The government aims to limit the general government deficit to a maximum of -1% of GDP by 2027. To achieve this, the government has committed to implementing measures that will improve general government finances by a net €6 billion to €10 billion at the 2027 level of spending (Ministry of Finance n.d.b).
Monitoring and reaction mechanisms ensure the successful implementation of these measures, and the central government’s system of spending limits is a key tool for fiscal policy control. Expenditure adjustments, generating permanent savings or increased fee revenue, are estimated to reach a net €4 billion by 2027. Structural policy measures have been outlined to strengthen public finances and stabilize the general government debt-to-GDP ratio by 2027. These measures include reforms to the unemployment benefit system, social security, the tax system, the labor market and other areas, with the aim of boosting employment.
A fixed-term investment program of €4 billion is planned over the current parliamentary term to foster sustainable growth. This program will focus on significant investments in transport infrastructure, reducing the repair backlog and promoting rail projects. It will be financed through the sale of government assets, avoiding an increase in central government borrowing requirements.
The fiscal and structural policy objectives and measures are reported annually in the general government fiscal plan and budget proposals, which align with independent economic forecasts. These documents, including the Stability Program submitted to the European Commission, contribute to the European Semester framework, through which the Commission examines and monitors member states’ fiscal policies. However, there are currently no budgetary rules requiring a prioritization of public investment and efforts to safeguard future investment opportunities. The government does not incorporate long-term planning or conduct systematic, forward-looking assessments of the budget’s impact. Nevertheless, long-term planning and systematic assessment are included in the government program.
Citations:
Ministry of Finance. n.d.a. “Spending limits in central government finances and the budget.” https://vm.fi/en/spending-limits-in-central-government-finances-and-the-budget
Ministry of Finance. n.d.b. “Fiscal Policy.” https://vm.fi/en/fiscal-policy
The budget process in Finland is transparent. There are no subsidiary budgets outside the normal budget. Additionally, there are no budgetary rules mandating the accumulation of financial reserves during economic expansions to boost financial capacity during times of crisis. The national budget does not explicitly address the SDGs or other transformation goals. Furthermore, there are no target values associated with expenditures for economic and social development.
The objectives of fiscal policy, outlined in Petter Orpo’s government program, influence economic structures, thus impacting citizens, households and businesses. Key decisions on taxation, social security benefits, pensions and their funding shape the nation’s economic landscape, and these choices are integral to structural social policy with lasting effects on the economy. The implementation of fiscal policy is carried out through instruments such as the general government fiscal plan and the budget.
The fiscal policy of Prime Minister Orpo’s government centers on ensuring a welfare society for future generations. The primary goal is to enhance general government finances and reverse Finland’s trend of increasing indebtedness. The government aims to limit the general government deficit to a maximum of -1% of GDP by 2027. To achieve this, the government has committed to implementing measures that will improve general government finances by a net €6 billion to €10 billion at the 2027 level of spending (Ministry of Finance n.d.b).
Monitoring and reaction mechanisms ensure the successful implementation of these measures, and the central government’s system of spending limits is a key tool for fiscal policy control. Expenditure adjustments, generating permanent savings or increased fee revenue, are estimated to reach a net €4 billion by 2027. Structural policy measures have been outlined to strengthen public finances and stabilize the general government debt-to-GDP ratio by 2027. These measures include reforms to the unemployment benefit system, social security, the tax system, the labor market and other areas, with the aim of boosting employment.
A fixed-term investment program of €4 billion is planned over the current parliamentary term to foster sustainable growth. This program will focus on significant investments in transport infrastructure, reducing the repair backlog and promoting rail projects. It will be financed through the sale of government assets, avoiding an increase in central government borrowing requirements.
The fiscal and structural policy objectives and measures are reported annually in the general government fiscal plan and budget proposals, which align with independent economic forecasts. These documents, including the Stability Program submitted to the European Commission, contribute to the European Semester framework, through which the Commission examines and monitors member states’ fiscal policies. However, there are currently no budgetary rules requiring a prioritization of public investment and efforts to safeguard future investment opportunities. The government does not incorporate long-term planning or conduct systematic, forward-looking assessments of the budget’s impact. Nevertheless, long-term planning and systematic assessment are included in the government program.
Citations:
Ministry of Finance. n.d.a. “Spending limits in central government finances and the budget.” https://vm.fi/en/spending-limits-in-central-government-finances-and-the-budget
Ministry of Finance. n.d.b. “Fiscal Policy.” https://vm.fi/en/fiscal-policy
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
8
7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
In general, research and innovation policy in Finland focuses on basic and applied research at research institutions, supports startups that convert scientific output into products, and seeks to foster productivity as well as social innovations.
The national research, development and innovation (RDI) road map was finalized in December 2021 (Ministry for Economic Affairs and Employment n.d.). It opens avenues for enhanced collaboration between businesses and research entities. This RDI road map aims to foster sustainable growth and create an environment that attracts domestic and foreign companies to invest in RDI activities within Finland. However, the road map is not binding, and there are no sector-specific action plans.
Twelve public research institutes operate under various ministries, promoting and coordinating the development of social innovations. The primary agency for technological research development is the Technical Research Center of Finland (VTT), which falls under the Ministry of Economic Affairs and Employment. VTT collaborates with companies, research institutes, higher education institutions and policymakers at both the national and international levels.
Regarding R&D activities, other public research institutes are more mission-oriented, encompassing a wide range of research objectives. Their mandates can span basic and applied research, along with additional responsibilities such as monitoring, data collection and management, certification, and inspection (Schienstock and Hämäläinen 2001).
The recognition of companies as key partners for research institutions is reflected in increased private sector cooperation in Finland’s research sector. However, successful startup companies tend to be acquired by technology giants (GAFAM), thereby eliminating the benefits of innovations at the local and national level.
Finland was previously among the leaders in research and development (R&D) spending, as well as in the number of researchers and patent applications. In 2014, Finland had the European Union’s highest R&D intensity, followed by Sweden and Denmark. However, this leading position declined due to weakening economic prospects.
The innovation system’s low level of internationalization is a particular weakness. Moreover, the focus of R&D has been on applied research, with basic research at universities and other institutes benefiting little. In the long run, given the obvious dependence of applied research on basic-research developments, the heavy bias in favor of applied research and the continuing neglect of the financial needs of schools and higher learning institutions will have negative consequences for product development and productivity.
Furthermore, the system of technology transfer from universities to the private sector is comparatively weak, and academic entrepreneurship is underdeveloped.
Citations:
The Research and Innovation Council of Finland. 2010. Research and Innovation Policy Guidelines for 2010-2015.
Schienstock, Gerd and Timo Hämäläinen. 2001. Transformation of the Finnish Innovation System: A Network Approach. Sitra Series 7. Accessed January 7, 2021. https://media.sitra.fi/2017/02/28142146/raportti7.pdf
Ministry for Economic Affairs and Employment. n.d. “The National Roadmap for RDI Creates Opportunities for More Intensive Cooperation Between Enterprises and Research.” https://tem.fi/en/the-national-roadmap-for-rdi
The national research, development and innovation (RDI) road map was finalized in December 2021 (Ministry for Economic Affairs and Employment n.d.). It opens avenues for enhanced collaboration between businesses and research entities. This RDI road map aims to foster sustainable growth and create an environment that attracts domestic and foreign companies to invest in RDI activities within Finland. However, the road map is not binding, and there are no sector-specific action plans.
Twelve public research institutes operate under various ministries, promoting and coordinating the development of social innovations. The primary agency for technological research development is the Technical Research Center of Finland (VTT), which falls under the Ministry of Economic Affairs and Employment. VTT collaborates with companies, research institutes, higher education institutions and policymakers at both the national and international levels.
Regarding R&D activities, other public research institutes are more mission-oriented, encompassing a wide range of research objectives. Their mandates can span basic and applied research, along with additional responsibilities such as monitoring, data collection and management, certification, and inspection (Schienstock and Hämäläinen 2001).
The recognition of companies as key partners for research institutions is reflected in increased private sector cooperation in Finland’s research sector. However, successful startup companies tend to be acquired by technology giants (GAFAM), thereby eliminating the benefits of innovations at the local and national level.
Finland was previously among the leaders in research and development (R&D) spending, as well as in the number of researchers and patent applications. In 2014, Finland had the European Union’s highest R&D intensity, followed by Sweden and Denmark. However, this leading position declined due to weakening economic prospects.
The innovation system’s low level of internationalization is a particular weakness. Moreover, the focus of R&D has been on applied research, with basic research at universities and other institutes benefiting little. In the long run, given the obvious dependence of applied research on basic-research developments, the heavy bias in favor of applied research and the continuing neglect of the financial needs of schools and higher learning institutions will have negative consequences for product development and productivity.
Furthermore, the system of technology transfer from universities to the private sector is comparatively weak, and academic entrepreneurship is underdeveloped.
Citations:
The Research and Innovation Council of Finland. 2010. Research and Innovation Policy Guidelines for 2010-2015.
Schienstock, Gerd and Timo Hämäläinen. 2001. Transformation of the Finnish Innovation System: A Network Approach. Sitra Series 7. Accessed January 7, 2021. https://media.sitra.fi/2017/02/28142146/raportti7.pdf
Ministry for Economic Affairs and Employment. n.d. “The National Roadmap for RDI Creates Opportunities for More Intensive Cooperation Between Enterprises and Research.” https://tem.fi/en/the-national-roadmap-for-rdi
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
Following the collapse of financial markets in Europe in 2008 and the increased vulnerability of financial markets globally, political leaders in Finland have urged the passage of stronger regulations and more coordinated market supervision. In both attitudes and actions, Finland has positioned itself as an agenda-setter, offering support to countries seeking to advance self-regulation and combat excessive market risk-taking. Finland has also pursued measures to secure its own finances.
In the financial architecture as in other areas of government, Finland has effectively and credibly implemented relevant international agreements to prevent and combat high-risk financial activities that pose systemic risks.
According to a December 2017 report by the International Monetary Fund, Finland’s banking system is well-capitalized. The report also noted that relocating the Nordea Group’s headquarters from Stockholm to Helsinki will more than triple the size of bank assets under supervision. Importantly, Denmark, Finland, Norway and Sweden all have sound financial systems that have withstood the impact of the European financial crisis.
In 2013, the Finnish government approved the Europe 2020 National Program, which outlines measures and national targets for achieving the goals of the Europe 2020 strategy. The program includes proposals to create an effective national macroprudential supervision system.
The Financial Supervisory Authority, with approximately 200 employees, oversees Finland’s financial and insurance sector (Financial Supervisory Authority n.d.). The Financial Markets Department of the Ministry of Finance sets the rules for financial markets and the framework within which they operate. This department is also responsible for ensuring that the Ministry of Finance’s international activities remain effective.
According to the corporate watchdog group Finnwatch, Finland performed poorly in the 2022 Financial Secrecy Index. Among 141 countries, Finland secured the 88th position in the index, compiled biannually by the Tax Justice Network, an advocacy group from the United Kingdom composed of researchers and activists addressing concerns related to tax avoidance and tax havens, focusing specifically on tax transparency issues. Countries facing greater transparency challenges are placed higher in the rankings.
Finnwatch highlighted Finland’s particularly weak standing in terms of corporate ownership transparency. In Finland, data regarding ownership beneficiaries’ registries are not accessible to the public; only the largest corporate owners are included in the registry. Finnwatch also pointed out that requests for corporate financial statements from the registry incur fees, and court decisions on tax-related matters are not fully disclosed to the public and are not available free of charge (YLE News 2022).
In the international arena, the government of Finland has advocated for coordinated international efforts to reform the global financial system and eliminate tax and regulatory havens. However, Finland is not considered one of the world’s top aid initiators or agenda-setters. Finland is a committed partner rather than a leader.
Citations:
Financial Supervisory Authority. n.d. “About FIN-FSA.” https://www.finanssivalvonta.fi/en/about-the-fin-fsa/
YLE News. 2022. “Finland Performs Poorly in Financial Transparency Comparison, Watchdog Says.” https://yle.fi/a/3-12449051
In the financial architecture as in other areas of government, Finland has effectively and credibly implemented relevant international agreements to prevent and combat high-risk financial activities that pose systemic risks.
According to a December 2017 report by the International Monetary Fund, Finland’s banking system is well-capitalized. The report also noted that relocating the Nordea Group’s headquarters from Stockholm to Helsinki will more than triple the size of bank assets under supervision. Importantly, Denmark, Finland, Norway and Sweden all have sound financial systems that have withstood the impact of the European financial crisis.
In 2013, the Finnish government approved the Europe 2020 National Program, which outlines measures and national targets for achieving the goals of the Europe 2020 strategy. The program includes proposals to create an effective national macroprudential supervision system.
The Financial Supervisory Authority, with approximately 200 employees, oversees Finland’s financial and insurance sector (Financial Supervisory Authority n.d.). The Financial Markets Department of the Ministry of Finance sets the rules for financial markets and the framework within which they operate. This department is also responsible for ensuring that the Ministry of Finance’s international activities remain effective.
According to the corporate watchdog group Finnwatch, Finland performed poorly in the 2022 Financial Secrecy Index. Among 141 countries, Finland secured the 88th position in the index, compiled biannually by the Tax Justice Network, an advocacy group from the United Kingdom composed of researchers and activists addressing concerns related to tax avoidance and tax havens, focusing specifically on tax transparency issues. Countries facing greater transparency challenges are placed higher in the rankings.
Finnwatch highlighted Finland’s particularly weak standing in terms of corporate ownership transparency. In Finland, data regarding ownership beneficiaries’ registries are not accessible to the public; only the largest corporate owners are included in the registry. Finnwatch also pointed out that requests for corporate financial statements from the registry incur fees, and court decisions on tax-related matters are not fully disclosed to the public and are not available free of charge (YLE News 2022).
In the international arena, the government of Finland has advocated for coordinated international efforts to reform the global financial system and eliminate tax and regulatory havens. However, Finland is not considered one of the world’s top aid initiators or agenda-setters. Finland is a committed partner rather than a leader.
Citations:
Financial Supervisory Authority. n.d. “About FIN-FSA.” https://www.finanssivalvonta.fi/en/about-the-fin-fsa/
YLE News. 2022. “Finland Performs Poorly in Financial Transparency Comparison, Watchdog Says.” https://yle.fi/a/3-12449051