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Finland considers electricity VAT cut

Economics Minister proposes cut from 24% as inflation rises to 7.8%

Following discussions on a VAT cut to petrol and food (see below), the Minister of Economy, Mika Lintilla, has suggested a cut to domestic electricity. This would be from the current standard rate of 24% to the reduced rates of either 14% or 10%.

Finland’s June inflation rose to 7.8% from May’s 7.0%. Electricity inflation is running at over 22%.  These are the highest inflation rates in almost 40 years.

Jump in May inflation to above 7% and recession worries prompts government to review VAT cuts

The Finnish Finance Minister has confirmed that a Value Added Tax rate cut on petrol and basic foods is under consideration back in June. This comes as Finnish inflation hit 7.1% in May 2022, up from 5.8% in April. This is the highest in decades.

The standard VAT rate in Finland is 24% which is levied on petrol and similar fuels. Foodstuffs is subject to the reduced VAT rate of 14%. Any VAT cut would presumably be applied to both.

European VAT inflation cuts have been widespread since the end of 2021 when inflation began to rise.

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EU VAT rate setting freedoms

From April 2022, EU agreed reduced VAT rate setting freedoms. This includes to cut rate below 5% for the first time on a limited range of supplies.

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