Image: Yle

Finnish magazine publishers have been shipping their publications to Norway as part of a large-scale scheme to avoid value-added tax.

Up until 2011 magazines and periodicals were exempt from VAT, but the Jyrki Katainen government decided to start charging tax as an austerity measure. It was set at a discounted rate of nine percent and in 2012 was raised to 10 percent (the full rate is 24 percent) but it came at a time of declining readership levels and revenues, and publishers felt the pinch.

Companies in the sector saw revenues decline and started savings programmes, and firms eventually realised that they could avoid the tax.

Juha Blomster, a manager at A-Lehdet admits that his firm operates in this way, claiming that the loophole helps to save Finnish jobs.

Responsible employer

"Our responsibility as an employer is to secure Finnish jobs," said Blomster. "I can still look myself in the mirror and make the same decisions again."

If a magazine is delivered to Finland from outside the EU tax area, VAT is not levied. In 2013 magazine publishers paid some 31 million euros in VAT. But that fell to just three million euros the following year, before jumping back to 15 million euros in 2015.

Mistaken politicians

When the increase in VAT was being prepared, Kimmo Sasi chaired parliament's Finance committee. He says that the ministers in charge at the time (Social Democrat Finance Minister Jutta Urpilainen and Communications Minister Krista Kiuru) made a mistake.

"In negotiations at that time there was a belief that business was good for the media," said Sasi. "It has to be admitted that their view was mistaken. There were already signs that digitalisation could lead to tighter competition in the media sector and publications' subscriber numbers would start to decline, and that certainly accelerated when VAT on publications rose."

Sasi says that although publishers' Norwegian schemes are legal, they are not morally acceptable.