Centre Party Chairman Juha Sipilä stated the following in an interview with the Financial Times (Finland’s economy: In search of the sunny side, 11.3.2015): “The public sector accounts for 58 per cent of GDP while taxes are equivalent to 46 per cent of GDP.”
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The claim that Finland’s tax ratio is 46 per cent is incorrect.
Finland’s tax ratio, i.e. the ratio of taxes and other compulsory contributions collected by general government during the year to GDP, stood at 44.1 per cent in 2014, according to Stastictics Finland’s preliminary national accounts data. The current tax ratio is calculated according to the ESA 2010 national accounts, which have been applied since July 2014. Sipilä’s tax ratio may be based on the previous ESA 1995 figures, which showed a smaller GDP and a higher tax ratio.
Sipilä’s second claim concerns the size of the public sector.
If we interpret the claim made in English to mean that the share of public expenditure is 58 per cent of Finland’s GDP the claim is incorrect.
In 2014 the share of public expenditure was 21 per cent of GDP.
If we interpret the claim to mean that the ratio of total public expenditure to GDP is 58 per cent, the claim is almost correct.
According to Statistics Finland, the ratio of total public expenditure to GDP in 2014 was 58.7 per cent and the ratio of total revenue was 55.5 per cent. The difference amounts to 3.2 per cent, which shows the general government deficit. (The figures have been updated on the basis of data released by Statistics Finland on March 31.)
Public revenues and expenditures include a notable number of items calculated twice as expenditure and revenue. Such items include e.g. many internal local and central government expenses and revenues, value added tax paid by local and central government and pensions and other payments made by local and central government as employer to social security funds, which are also included in the public sector.
Precise data of all items entered twice as expenditure and revenue is not available, but their total volume is estimated at roughly 8 percentage points of GDP. They increase the tax ratio by some 5 percentage points.
For the above reasons an expenditure-to-GDP ratio of 58.7 per cent gives a slightly misleading picture about the size of Finland’s public sector.
Statistics Finland preliminary data on Finland’s tax ratio in 2014.
Statistics Finland statistics on the size of the public sector, section 1.7