Kangasniemi municipality in Finland will keep its income tax rate unchanged next year. The local government committee proposed maintaining the 9.4 percent rate in Monday's meeting. The municipal council must still approve this decision.
The municipality first increased the tax rate from 8.86 percent to 9.4 percent to balance its budget. If approved, this will mark the third consecutive year with the same tax rate for residents.
What is the effective tax rate? This measures actual tax revenue better than the official rate. It accounts for various tax deductions that reduce municipal income.
Kangasniemi's effective tax rate improved significantly in recent years. Before 2023, the gap between official and effective rates exceeded 7.8 percentage points. Last year, the difference narrowed to 2.85 percent. This year, the effective rate reached 6.57 percent with just 2.83 percent difference from the official rate.
The improvement comes from tax deduction reforms. Since 2023, many deductions shifted from municipal to national taxation. This change gives municipalities more stable revenue.
Maintaining the current rate suggests the municipality's financial situation has stabilized after previous increases. The consistent tax approach provides predictability for residents while covering essential services.