📋 Tender Overview
The report commissioned by the Ministry of Social Affairs and Health discusses the effects of the transfer of contributions to social security contributions and more generally the use of social security contributions as a tool for economic policy. The study was carried out by Labore.The labour market confederations reached the outcome of the negotiations on the Competitiveness Pact for the Labour Market on 29.2.2016. With regard to social security contributions the agreement included an increase in the employees earnings-related pension contribution and unemployment insurance contribution and a corresponding reduction in the employers contributions. In addition according to the agreement the reduction in the employers social security contribution from 2020 onwards would be at least 0.58 percentage points.In early 2023 there has been public debate on whether these contributions to social security contributions as amended in connection with the Competitiveness Pact should be restored to the level prior to the Competitiveness Pact.The report discusses the effects of the transfer of contributions to social security contributions and more generally the use of social security contributions as an instrument of economic policy. In addition the report presents a comparison of the distribution of social security contributions between employers and employees in Finland and in Finlands key control countries Sweden Denmark Norway and Germany.According to the report in the end all that remained of the Competitiveness Pact was a change in the burden-sharing of social security contributions. It lowers employers labour costs reduces the net income of insured persons and creates a funding gap in the public sector. In this way the change in social security contributions will also put pressure on general government expenditure and possibly other taxes to change. In addition in the light of previous empirical research it can be assumed that in the longer term at least part of employers contributions will be passed on to employees. The assessment of tax impacts was found to be challenging.According to the calculations in the report the return of social security contributions for insured persons from the 2022 level to the level of 2016 would reduce the insured persons contributions by a total of 1.68 percentage points. Returning social insurance contributions to the 2016 level would increase employees income by EUR 1644 million. Taxation would be tightened by just under EUR one billion so that the net effect would be close on EUR 700 million. The return of social insurance contributions from the 2021 level would increase employers average contributions by a total of 2.42 percentage points. Based on the wages and salaries sum for 2021 this would increase the income of the public sector by EUR 1487 million. The corporate tax rate would reduce this impact to EUR 1189 million. The return of general government social security contributions to the 2016 level and to the contribution bases would be strengthened by EUR 723 million.
