The intention has been to lighten energy costs by, for example, developing the energy tax refund system, but now the forest industry is threatened with an additional annual bill of €80 million for increased energy and fuel taxes.
Competitive energy taxation was set as a target
In autumn 2009, the Cabinet Committee on Economic Policy promised to look after the competitiveness of the forest industry’s energy taxation when it was discovered that tax hikes, which were designed to compensate for the effects of the lowering of the KELA national pension levy, would raise the forest industry’s energy taxes to a level that was manifold in comparison to key competitor nations.
If these planned hikes are implemented, the forest industry’s energy and fuel taxes will increase by €80 million to €224 million in total.
Energy tax trimmer provides the solution
Changes to the so-called energy tax trimmer, i.e. a system for refunding excessive energy taxes, must be implemented within the limits allowed in the Directive so that the industry’s energy taxes can be lowered to match our rival countries.
A revised energy tax trimmer must be in place by the beginning of 2011, and taxes in excess of 0.5% of value added should be refunded in full.
The system should also be altered to ensure that the trimmer does not treat different companies unequally. If the present model is not altered, the net effect of tax hikes and the reduced KELA national pension levy will lead to very substantial cost differences between companies.
High energy taxes – no new hikes needed
Finnish energy taxes are already considerably higher than those of competitor nations.
The forest industry of Sweden, for example, pays no energy taxes whatsoever, providing it with a €65 million cost advantage over the forest industry of Finland. If the Finnish tax trimmer is not revised in spite of promises to do so, Sweden’s advantage will increase to as much as €130 million.
Increases in fuel taxes would add costs more
There are plans for fuel tax hikes next year, and this will lead to further cost increases for the forest industry, which is a major buyer of transport services.
Raising the taxes on diesel and motor fuel oil will cause an extra cost of €20 million for the forest industry unless these hikes are compensated for with the proposed cut to the vehicle tax on lorries.
Another EUR 10 million from freight transport fees
Government measures that hamper the industry’s competitiveness also include increases to freight transport fees, which were necessitated by hikes to track charges and the ongoing modernisation programme at Finland’s national rail operator VR; these will have a combined effect of about €10 million this year alone.
The set of measures, which were proposed to Minister of Transport Vehviläinen in April with the aim of temporarily reducing track charges levied of freight transports, must be implemented by the budget negotiators.
Planned taxes and charges that will increase energy and fuel costs as follows:
Present tax / Planned tax /Change
Electricity and heating fuels:
€70m / 130m /+ €60m
Diesel tax on transports:
€65m / €80m /+ €15m
Tax on motor fuel oil (forestry and working machines):
€9m / €14m /+ €5m
State rail company, transport fee hikes,
change: + €10m
Lowering of KELA national pension levy on employers,
change: – €50m
Lowering of national pension levy on employers and increase in energy and transport costs, total: + €40m
The lowering of the KELA national pension levy on employers brought the forest industry cost savings amounting to €50 million as of the beginning of 2010.
However, the funding of this KELA decision and other measures being implemented by the Government threaten to burden the forest industry with €90 million in extra costs, which will seriously weaken competitiveness unless the industry receives appropriate compensation.
Timo Jaatinen, Director General, Finnish Forest Industries Federation, tel. +358 9 132 66 00
Stefan Sundman, Senior Vice President (Energy and Environment), tel. +358 9 132 6611 or +358 40 535 0501
Harri Rumpunen, Director (Logistics),
tel. +358 9 132 6614 or +358 400 634 614