FINNISH TAXATION MAJOR ISSUE IN ELECTION CAMPAIGN
Personal taxation has emerged as the
major economic issue in Finnish general elections later this
month, and Conservative gains could mark a shift towards
indirect taxation and accelerate moves towards more
market-oriented banking practices, economists say.
    Opinion polls indicate the Conservative Party, Finland's
second largest, may gain enough clout after the elections to
join a coalition government which is still likely to be
dominated by the Social Democrats of Prime Minister Kalevi
Sorsa.
    But the economists point out that Conservative economic
policies differ only slightly from the governments', and that
trade with the Soviet Union will not be affected.
    Helsinki bankers said a new government, including the
Conservatives for the first time in 20 years, could bring about
a shift from direct to indirect taxation.
    The present coalition of Social democrats and Centrists has
embarked on a tax reform programme to cut marginal taxation,
which is up to 75 pct in the highest income scales. The
opposition has also called for reforms, but they differ over
how to regain lost state revenues.
    One Conservative favoured possibility is abolishing tax
exemption on interest from bank deposits and government bonds.
    Hannu Halttunen, of Helsinki bank Kansallis-Osake-Pankki
(KOP), told Reuters "We want to be more free in setting interest
rates and in creating different deposits to suit the individual
investors. If tax on interest is introduced, then we prefer a
system with taxation of real interest gains."
    Under present laws, bank customers are exempted from tax on
interest when banks jointly set interest rates. Bankers said
this had encouraged cartel-style banking and was hindering
tougher inter-bank competition.
    A London-based Nordic banking expert said liberalisation
was too strong a word to use in a Finnish context, but a
Conservative presence could dislodge traditional practices.
    "It would probably result in new practices that have been
seen elsewhere for a few years growing rather more quickly in
Finland," he said, in a reference to money market instruments.
    All parties, especially the Conservatives, have been
careful to avoid making Finnish-Soviet trade an election issue.
Moscow is Finland's largest trading partner. Until a few years
ago the Conservative Party was seen as anti-communist, but has
now moderated its stance, political analysts say.
    Trade between Helsinki and Moscow is based on a barter
system, and is balanced under long-term accords.
    In January the two countries signed a 1987 agreement worth
30 billion markka, but trade in the past two years has been
declining due to the fall in the price of crude oil, which
accounts for 80 pct of Finnish imports from the Soviet Union.
    The bankers said taxation had become the major economic
theme of the campaign because there were few other issues.
    Inflation was 3.4 pct in 1986, compared with 5.9 pct in
1985, and unemployment has increased slightly from 6.1 pct of
the workforce in 1985 to last year's levels of 6.7 pct.
    The Social democrats in 1986 doubled the country's foreign
trade surplus compared with 1985, from 2.50 billion markka to
5.04 billion markka.
    Opinion polls say Sorsa's Social Democrats will remain the
largest party in the 200-seat Parliament, with some 26 pct of
the vote. They currently hold 57 seats.
    The Centre Party, the other major coalition partner, is
also expected to hold on to its 37 seats.
    But increased Conservative support and a decline for the
Communists could make force Sorsa to allow the Conservatives
into government. They currently hold 44 seats.
 REUTER
