Tax cuts or direct support?

The article examines means of curbing inflation in Finland and Europe in 2022, when eurozone inflation rose above 9 percent.

In Finland, inflation was driven up in particular by energy and food. The most common policy measures have been tax reductions and income transfers. Economists and international organisations have, however, criticised value added tax reductions: they are costly, benefit higher-income earners the most, do not necessarily pass through to consumer prices, and weaken incentives for energy saving.

Targeted income transfers to those in the weakest position are the preferable alternative — they are cheaper, better targeted, and preserve energy-saving incentives. In Finland, the existing social security system facilitates such targeting. (AI translation)

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