Tax administration highlights rising small service company insolvencies following 2024 1.5% VAT hike
The Finnish tax authority has highlighted a sharp rise in small businesses closing and have attributed the 2024 VAT rise to 25.5% . The problem has emerged on latest tax gap figures. According to the analysis of receipts versus forecasts, VAT was the largest component of the tax debt, just over €1.78 billion, almost half of the total tax debt. The amount of VAT debt has increased by EUR 133 million, or eight percent, from the previous year.
The EU VAT gap also expanded over the same period, indicating regional economic headwinds may also have contributed.
Over 50% rise in bankruptcies
In the first quarter of 2025, the Tax Administration filed 611 bankruptcy applications, which is up to 57 percent more than in the same period in 2024. The number of bankruptcies is increasing especially among smaller companies and business names. Two-thirds of the tax debt concerns customers who have been declared bankrupt or are insolvent. After the general VAT rate was increased in the autumn of 2024, small companies in the service sector have had difficulties. They have not been able to pass on the increased VAT in full to their prices. The number of bankruptcies is exceptionally high, and have not seen anything like this in this decade.
Considered by industry, the most bankruptcies were in construction, wholesale and retail trade.
Read more in of Finnish VAT guide.
