The document summarizes Finland's reform of health and social services and the establishment of a new regional level of administration. The key points are: 1) Currently there are only two levels of administration in Finland: municipalities and the state, with a complicated cooperation network between them. Municipalities have extensive responsibilities including schools, vocational training, and social/health services. 2) The population is aging rapidly and demand for health services is increasing across the country, posing a challenge to cost control in the current system. 3) The reform plan creates a new elected regional level to ensure services and skilled labor across the country. It transfers responsibility for social/health services and some state duties to the new regional level from

1. Finnish reform of health and social services
and establishing the new regional level
Challenges and changes in finance
19.11.2018
OECD/Fiscal network

2. Current situation and challenges
‒ In Finland there are now only two levels of administration:
Municipality and State, between them the complicated State
and municipal regional cooperation network
‒ Municipalities have strong self-government and sound
income base: income taxes (free to decide), business tax
(share) and real estate taxes (decide in limits by law),
operating income and state subsidies
‒ the municipalities' responsibilities are extensive: including
basic schools, vocational training, social and health services
(hospitals in obligatory joint municipal authorities)
‒ Migration: cities are growing and remote areas weakened
‒ the problem is the rapid aging of the population and the
increasing demand for health services in all parts of the
country – cost development is a challenge in current system
‒ the need for reforming social and health services and for
better control of cost development
‒ To guarantee the quality of services in every part of country
2
Income base:
Taxes 58 %
Op.income 20 %
State grants 22 %
Total 38,5 Bn €
/2018
(municipalities
only)

3. Reform plan
‒ to create a new level of regional governance that would be
democratically elected
‒ services in all parts of the country and ensuring the availability of
skilled labor
‒ Initially regions do not have taxation right, there will be a report next
year
‒ The main task of the new regional level is social and health services,
transferred from the municipalities and the joint municipal authorities
‒ Other tasks transferred are fire and rescues services and many
duties from State administration
‒ -financing is carried out by cutting municipal tax revenue percent
and state subsidies -> 50 % of tasks & cost cut, 50 % of revenues
cut from municipalities (=takes economically most risky tasks off
from small municipalities)
‒ reform aims to keeping the current the overall tax rate for public
administration and achieving savings of 3 billion euros in the cost
development forecast for 2029 3

4. 4
Municipalities’ tax revenue projection for 2018–2022
Municipalities’ tax revenue 2018–2021, EUR billion, according to local government accounts
- The regional government, health and social services reform will result in a clear change in
municipalities’ tax structure.
- The share of local income tax of total tax revenue will decrease on average by around 10 percentage
points (74%) and the share of real estate tax will almost double (14%). The share of corporation tax
of total tax revenue will also increase considerably (12%).
- However, even after the reform, the most important tax base will be formed by earned income of
municipal residents.
- Developments in demographic structure and employment have a decisive impact on individual
municipalities’ tax base and, consequently, their income generation.
2018 2019 2020 2021 2022
Local income tax 18,9 20,0 20,7 10,3 10,0
Corporation tax 1,8 2,0 2,1 1,6 1,6
Real estate tax 1,8 1,9 1,9 1,9 1,9
Total 22,6 23,9 24,6 13,9 13,6
Average local income tax rate 19,86 19,86 19,86 8,33 8,33
Municipalities’ share of corporation tax revenue 31,35 31,30 31,30 22,28 22,28

5. 7.12.2018
”
Government Programme:
Simplified organisation of regional government (central, regional and local levels).
The primary solution is to bring the operations together into autonomous regions.
Government today Government as of 2021
295 municipalities 295 municipalities
National Licensing and
Supervisory Authority
18 counties
Central government Central government
6
Regional state
administrative agencies

6. Markku Mölläri
Ministerial Adviser
+358 40 568 1492
markku.mollari@vm.fi
www.vm.fi
Miikka Vähänen
Ministerial Adviser
+358 29 553 0465
miikka.vahanen@vm.fi
www.vm.fi
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