The population structure is anticipated to change beginning in the middle of the next decade, as the number of pensioners increases swiftly and the number of people in working age starts to decrease. Hand in hand with these changes, the Finnish economy faces greater internationalisation which threatens to reduce tax revenues. Since many taxes are high in Finland both compared internationally and in EU terms, increased mobility of capital, labour and commodities puts pressures on several taxes already in the near future. The most immediate pressures are visible in indirect taxation. The possibilities to reduce taxes on work and employment are therefore limited and the tax structure threatens to become ever more disadvantageous from an employment point of view.
Income taxes are by international standards high in Finland.
It is essential, that the rate of employment of the active population rises substantially in order to meet the costs of the impending changes in the structure of population. The key question in the years to come is to what extent structural unemployment can be reduced. This dictates to a large extent not only developments in employment but also in economic growth potential. Favourable economic developments and the reductions in public expenditures have improved substantially the general government balance, and this is anticipated to remain healthy in the next few years. A smaller public sector is, however, essential because future changes in the economic environment dictate the extent to which public expenditure can be financed.