At the end of August, the cabinet discussed the Ministry of Finance's budget proposal. The proposal aims to shift the focus of taxation from growth-impeding taxes on labour and entrepreneurship towards environmental and health-based taxation. In fact, the most significant amendments in the proposal concern excise duties levied on tobacco products, sweets and liquid fuels: in accordance with the proposal, these duties as well as the vehicle tax are about to rise.

On the basis of the budget proposal, the government agreed on, among other things, the following proposed amendments concerning the taxation of private individuals:

  • The higher rate of capital income tax will rise to 33% (now 32%).
  • The threshold for progression of capital income tax will be lowered to EUR 30,000 (now EUR 40,000).
  • As for progressive income tax, the lower threshold of the highest income level will be lowered to EUR 90,000 (now EUR 100,000), and the validity period of this income level will be extended until the end of 2018.
  • All rates of inheritance tax and gift tax will be raised by one percentage point.
  • The tax deductible level of housing mortgage interest will be 65%. 

As regards the income taxation of undertakings, the proposal contains very few amendments. According to the proposal, the production support for film producers would become subject to tax and the partial (50%) deductibility of representation expenses for undertakings would be restored.

The budget proposal will be discussed in Parliament at the beginning of the autumn term, and the changes will probably take effect at the beginning of 2015.