Govt finalises €92.5b budget proposal for 2027 with €12.4b deficit

The four-party alliance government led by conservative Kansallinen Kokoomus (National Coalition Party-NCP) on Tuesday reached a decision on its budget proposal for 2027, said an official press release.

Leaders of the ruling parties approved the proposal of the EUR 92.5 billion budget with a deficit of EUR 12.4 billion and the proposal will be submitted to Parliament on 21 September.

The total amount of the budget is EUR 0.8 billion higher than the sum budgeted for 2026, including the second supplementary budget.

The deficit is being widened particularly by debt interest payments and necessary investments in defence and security.

The government is carrying on with previously agreed savings measures. In the 2027 budget, direct spending cuts will rise to EUR 4.8 billion.

Decisions to curb indebtedness will be implemented to the tune of nearly EUR 1 billion next year. Savings will be targeted, among other areas, at central government administration.

According to the proposal, the government agreed to increase in the tax credit for household expenses, which will take effect retroactively this year, will continue in 2027.

The reduction in the corporate tax rate to 18 per cent will enter into force at the beginning of next year.

The period for deducting business losses will be extended from the current 10 years to 25 years.

In its spring spending limits discussion, the government agreed on increasing the total amount of its fixed-term investment programme by EUR 0.2 billion to around EUR 4.7 billion. The Government also agreed on additional or new funding for several projects.

The budget proposal for 2027 eases taxes on low and middle income earners by a total of EUR 230 million; makes index adjustments to earned income tax criteria at all income levels; shifts the taxation date of employee stock options with respect to shares in unlisted companies from the time of exercise to the time of transfer of the underlying asset; expands and increases the tax deduction for donations and increases the tax deduction for entrepreneurs.

In addition, certain changes will enter into force in 2026 that will have an impact on taxation in 2027. The changes will take effect retroactively from the beginning of 2026 included the tax credit for household expenses will be increased for 2026 and 2027. The scope of sports and cultural vouchers will be expanded and the maximum amount of the benefit will be increased as of 2026. The increase of the commuting expenses deduction threshold for the 2026 tax year will reduce cash accruals for 2027.

The corporate tax rate will be lowered by two percentage points to 18 per cent. Tax revenue will also be reduced by the exemption from the interest deduction limit granted to infrastructure projects critical that are to security of supply.

The carbon dioxide component of the tax on transport fuels and the basic motor vehicle tax will also be lowered.

Gradual increases to the excise duty on tobacco products were agreed and the indexation of the excise duty on alcohol products was decided. The abolition of the corporate tax exemption for Veikkaus Oy and the increase of the lottery tax in connection with the gambling system reform and will also boost tax revenue.

The government has decided not to pursue the tax expenditure envisioned for data centres.

The government will not implement the planned expansion of the waste tax. Insufficient uses were found for most of the waste fractions produced by the individual companies that had been proposed to be covered by the tax.

The government will continue to look into a reform of real estate taxation but will not implement the reform this parliamentary term. The timetable would not give property owners sufficient time to study and prepare for the impact of changes.

An increase of EUR 618 million over the Budget for 2026 is proposed in appropriations of the Ministry of Defence’s branch of government. The budget proposal also includes EUR 1.3 billion in budget authorities for procurement of defence materiel. A procurement authority of EUR 186 million is proposed for the operational expenses of the Finnish Defence Forces.

To support Ukraine, an additional allocation of EUR 200 million is proposed for the Ministry of Defence’s branch of government. In addition, EUR 3 million is proposed for the Ministry of the Interior’s branch of government for Ukraine-related transport costs and procurement.

About EUR 67 million is proposed for wellbeing services counties, the City of Helsinki and the HUS Group for investing in and maintaining the healthcare preparedness and readiness of the Finnish Defence Forces.

EUR 10 million is proposed for the Finnish Border Guard’s UXV30 project, set up for the procurement and introduction of unmanned surveillance systems. The project is being funded almost entirely by the European Union.

The Government maintains its commitment to raising R&D funding to 1.2 per cent of GDP by the year 2030. Based on a decision made in autumn 2025, the R&D Funding Act will nevertheless be amended so that the increase in central government funding required to achieve this target is updated annually to match the latest forecast.

Under the budget proposal, total R&D funding will be approximately EUR 3.40 billion in 2027. This represents an increase of some EUR 230 million compared to 2026. The largest increases will concern Business Finland’s R&D budget authority and the Research Council of Finland’s research project budget authority.