According to a report by the International Monetary Fund, Finland should raise its lower VAT rate and eliminate fossil fuel company subsidies.
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Flie photo taken in Helsinki on 30 December 2025. Image: Henrietta Hassinen / Yle
The Finnish state will need to achieve more savings as well as continue to adjust its finances for the next several years, according to a new report by the International Monetary Fund (IMF).
The IMF is a specialised UN agency that, among other things, aims to secure the financial stability of its members. The agency’s report, published on Monday, noted that Finland’s main problem is its significant public debt.
In its report, the IMF recommended that Finland: make its social security system more cost-effective, reduce business subsidies, reform the pension system, review its tax policies, use AI to accelerate productivity, and review its higher education system.
“Growth has struggled to rebound since the downturn in 2023. Private consumption was unusually weak, as heightened uncertainty, falling house prices, and still-high interest rates more than offset a modest recovery in real wages,” an excerpt of the IMF’s report on Finland stated, adding that weak private investment has shown “tentative signs of improvement”.
“But growth is expected to strengthen from 2026, as higher real disposable income underpins private consumption growth, private investment gains momentum, and the construction sector slowly recovers,” it continued.
IMF: Raise VAT, property taxes
The IMF’s report offered a number of recommendations regarding taxes.
Among other things, it recommended that Finland should eliminate subsidies to fossil fuel companies and consolidate its 13.5 percent VAT (on items like food, medicine and transport tickets) to the general VAT rate of 25.5 percent.
Finland decreased the smaller value added tax from 14 to 13.5 percent at the beginning of this year. On the other hand, in a previous effort to balance public finances, the government raised the higher VAT rate from 24 percent to 25.5 percent in 2024. That move affected the consumer costs on most other goods and services.
The IMF’s report also recommended that Finland should raise its property taxes.
In terms of dealing with its high unemployment rate, the IMF suggested that Finland be more effective in integrating immigrants so they can enter the labour market, including with the help of AI.
It also said Finland should strengthen the language education offered to immigrants.
The IMF report also suggested that Finland should consider introducing tuition at its universities, as well as limiting the number of degrees that higher education students can pursue, in order to free up spaces for other students.