The Finnish government has cancelled plans to raise the value added tax (VAT) on sweets and chocolate, Finance Minister Riikka Purra (Finns) announced in a post on X on Tuesday morning.
Nearly a year ago, the government had proposed to raise VAT on candy from the current 14 percent to 25.5 percent. At the time, Purra said the ministry aimed to raise taxes on harmful products.
"The government has decided to abandon a proposal to raise VAT on sweets and chocolate that was made during budget negotiations in April 2024," Purra's post read.
According to Purra, the decision was partly based on the large amount of criticism the plan received during the legislation's consultation round. She also noted that there was a good deal of uncertainty over whether the proposed law would be in line with EU regulations.
Purra noted that the government has agreed on measures to compensate the estimated 86 million euros in extra revenue a sweets tax hike would have offered in 2026.
Regarding those measures, the finance minister said the government has started work on eliminating tax subsidies for electricity use by data centres and the mining industry. It also aims to raise alcohol taxes on wine, due to last year's availability of wine with alcohol content of eight percent in regular shops.
Finland raised the general VAT rate from 24 percent to 25.5 percent in September, but the move brought in less money than expected.
Fazer pleased
The sweets VAT hike plan became referred to as the 'Fazer tax' because it affected Finland's leading chocolate and confectionery manufacturer the most. In response, Fazer announced plans to suspend a decision on plans to build a 750-million-euro factory in Lahti.
Fazer Group's President and CEO, Christoph Vitzthum, said he was satisfied with the government's decision.
"With the decision made by the Government, the investment process for Fazer's new chocolate factory in Lahti will move forward, and our aim is to make a decision as soon as possible," Vitzthum said in the release.
"In cooperation with other operators in the food industry, we have been engaged in dialogue on the subject with the government parties and important stakeholders since last spring. On behalf of the entire food industry, I would like to express my gratitude for the fact that the government has listened to us and experts in the field and has come to a conclusion that slightly decreases the uncertainty in our industry," Vitzthum said in the release.
According to Fazer's communications and sustainability unit chief, Joséphine Mickwitz, the company is pleased about the government's decision.
"We are naturally very happy about this news. This will ease some of the uncertainty within the industry," Mickwitz said in a press release on Tuesday. However, there is still a good deal of uncertainty in the company's operating environment, including fluctuations in cocoa prices, she noted.
Mickwitz said she was unable to comment yet about Fazer's possible future investments.
"It is still too early to say anything, but of course the investment process will proceed now," Mickwitz said in the release.
Orkla Finland also happy
Orkla Finland owns confectionary firm Panda, which manufactures sweets at a factory in Jyväskyä. Orkla Finland's CEO, Jutta Karppi, said she was very happy with the government's decision.
"This is a great day. I am really happy that this decision was made," she said.
According to the CEO, the candy VAT hike would not have had an immediate impact on the company, but the cancellation of the plan would strengthen domestic manufacturers.
Karppi said that the decision to cancel the tax increase plans would enable the company to invest as it had previously planned.
Lahti's factory hopes
Lahti Mayor Niko Kyynäräinen said he was also pleased about the news.
"This is hugely significant. If implemented, the investment in a chocolate factory will bring [the city] a huge amount of work and, in the long run, growth," he said.
The planned factory is expected to create hundreds of jobs in Lahti. The City has already invested 30 million euros in the area where the facility is being planned, while Lahti and Fazer have reached a preliminary agreement regarding a 34-hectare piece of property.
According to the mayor, the project's timeline will likely be clarified in the spring.
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