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National economy

​National economy

For the state to be able to function, it needs revenue, which is collected through taxation. Finns began paying taxes to the king in the 13th century. For a long time, taxation was unsystematic: various taxes and duties were levied by the crown, the church, local government and jurisdictional districts.

Today, tax can be levied by the state, municipalities, the Evangelical Lutheran Church and the Orthodox Church of Finland. In the Åland Islands, normal state tax is levied but in addition the region has the right to levy regional tax.

The state budget proposal

The Parliament decides, in conjunction with reviewing the budget proposal, on the revenues and appropriations of the state. Most of the budget allocations are targeted at covering statutory expenditure. Therefore, many of the laws passed by the Parliament have a direct impact on the state’s revenues and appropriations.

In addition to the revenues and appropriations included in the budget, central government finances also include non-budgetary funds. The state has 11 non-budgetary funds, the most notable being the State Pension Fund, the Housing Fund of Finland and the State Guarantee Fund. käsittelyn yhteydessä valtion tarvitsemista menoista ja tuloista.

​The State’s business activities

The State also undertakes business activities. After the declaration of independence, several state-owned enterprises were established, such as W. Gutzeit, and the state sulphuric acid and phosphate plants, Outokumpu Oy and Imatran Voima. State-owned enterprises were set up particularly in strategically and capital-intensive energy and industry sectors in which private financing was difficult to obtain. The last major state-owned companies were established in 1948 and 1960, respectively, when Neste Oy took over oil imports and Rautaruukki started to produce steel for the Finnish steel and shipbuilding industries.

From the 1980s onwards, state-owned enterprises were incorporated, and were managed like private enterprises based on normal business practices. The national railways, VR, became the VR Group and Post and Telecommunication changed its name to the Itella Group.

The State remains the owner of several companies either wholly or partly. In 2014, the State had holdings in 59 major enterprises. The State is the majority shareholder in 21 enterprises, the most significant being Finnair and Neste Oil. In addition, the State is a shareholder in 11 major publicly listed companies.

It is difficult to put an exact monetary value on the State’s assets. According to an estimate presented in the Helsingin Sanomat newspaper on 8 March 2014, the total State assets (including shares, land, roads, buildings, infrastructure and bonds) totalled 83 billion euro.

​Management of state finances

Managing state finances is the responsibility of the Ministry of Finance. The management and accumulation of state assets is, however, centralised under the Ownership Steering Department of the Prime Minister’s Office. The Department works closely with Solidium Oy, which is a holding company exercising state ownership power in nationally important enterprises and which aims to increase the value of the State’s assets. Solidium is a limited company wholly owned by the State.

The State also controls municipal finances, although local authorities have extensive self-government and taxation rights. Municipalities independently determine their tax rates, but they also receive corporation tax apportionment as decided by the Parliament. The State also supports municipal finances through state subsidies for various uses based on the system of central government transfers to local government.

Central government finances are controlled by the National Audit Office and the Audit Committee of the Parliament. The Treasury plays a key role in steering and monitoring many of the processes involved in the management of central government finances.