LOCAL TAXES in Finland vs. USA

Finnish sauna near the lake
Is Finnish SAUNA taxated – yes- it is not a permanent residence but other residence – it is worth of taxation in Summer and near the lake to swim

27.03.2019, 27th of March, 2019

LOCAL TAXES in Finland vs. USA


In Finland we have not really local taxes in the same meaning than in USA. Sure, we have 295 municipalities which have right  to collect income taxes, yes, but only income taxes based on salaries, wages, pensions, taxable social benefits. They have almost the same rate of tax, about 20 per cent. So the municipalities do not compete on taxes.

Every municipality must collect taxes, because the state (In Finland, only two administration levels to taxation: local municipalities, state) determines so many duties to them. The main function is to organize social and health care.  It takes about half of all income of municipalities, the state helps with central governments transfers (about 20 % of  costs).


If the resident (or local company) have real estate in the municipality so they must pay tax. The rate of tax is about 1-2 % of the latest taxable value in every city. Also the apartments are taxed at the same rate. The owner of the apartment pays the tax.

The third and the last way to get tax income in municipalities is based on the taxation of gains of local companies. The system is so that the state collect it and deliver it to the municipalities and determine the share ratio: about 70 % state/ 30 % municipalities, 2019 


The system is simply and cheap to local governments. The state organize by legislation the whole system, collect and passes on local taxes to each municipalicity monthly. It is also a benefit to citizens that they have almost the same level of taxation (local + state) in everywhere in the country. The biggiest cities (capital city Helsinki, Espoo, Turku) have a little bit lower level of local income taxation, but the housing is very expensive comparing to smaller cities and areas.

Also VAT (value-added-taxes) are on the same level (24 % of prices of goods and services) everywhere in Finland (almost the whole Europe has same levels and system) – but the whole revenue of VAT and other indirect taxes (fuels, alcohol) are collected to the state. .


In USA they have three (or four) levels of taxation: (school) districts, local governments, states, federal administration. Local authorities can levy both income taxes and indirect taxes – real estate taxes too. The rates of all taxes are quite low, OK, but they differs so much everywhere that it is a great work to administrate them to governments. The citizens have also find out many details of system when they are going to exchange the residence.

The areas have a real self-government in USA on the contrary in Finland. In Finland municipalities have only a formal right to determine the level of local income tax. As above is said the state assigns so many responsibilities to municipalities that the variation of the rates is quite narrow. The responsibilities (health-care, base-education, traffic) are so expensive everywhere. 

Puucee, wooden WC in Finland
Natural loo/smallest room/ toilet/wooden-WC/ in Finnish forest, is it taxable, no but the estate surrounding it has a little real-estate rate (1 -2 %) of its worth

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