The Societal Costs of Taxation – What Do We Know About the Adverse Effects of Finnish Taxes

Olli Ropponen

No 172, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract This report examines the benefits of different types of taxes in relation to their adverse effects, using a modeling framework and the international economic research literature. The basis for the study is literature on the causal effects of different tax types on their respective tax bases. These effects play a central role in determining the welfare losses caused by taxation and are therefore at the core of assessing the adverse effects of taxation. The modeling framework, in turn, makes it possible to incorporate causal effects directly into welfare analysis without the need for information that is less commonly reported in empirical studies, such as so-called compensated effects. The report examines several different types of taxes which, taken together, account for 84 percent of all taxes and tax-like revenues projected for the Finnish central government in 2026. Based on the results, clear differences are observed in the balance between benefits and adverse effects, both across different types of taxes and across different groups of taxpayers.

Keywords: Welfare Costs of Taxation; Optimal Taxation; Behavioral Responses to Taxation; Marginal Value of Public Finds (MVPF) (search for similar items in EconPapers)
JEL-codes: D61 H21 H24 H25 H30 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2026-01-19
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