2013 AmCham Policy Platform

FINLAND

AMCHAM

2013

PLATFORM

POLICY

2013 Policy Platform 1

Contents

About AmCham Finland ....................................................................................................................... 2

About the Policy Committee ............................................................................................................... 2

About the 2013 Policy Platform ........................................................................................................... 3

Contact……………………… ....................................................................................................................... 3

AmCham Finland policy objectives, 2013 ........................................................................................... 3

Increase Foreign Direct Investment in Finland ................................................................................... 4

Encourage innovation by reforming taxation ..................................................................................... 5

Take measures to address the demographic shift and Finland’s aging population ......................... 6

Develop the relationship between education and employment ....................................................... 8

Continue to strengthen existing relationships between Finland and North America ...................... 9


About AmCham Finland

AmCham Finland is an independent, non-profit, and non-governmental business association made

up of more than 270 American, Finnish, and other international member companies. As Finland’s

leading international business hub, AmCham provides services that are individually tailored to each

member company .The Chairman of the Board is Heikki Malinen, CEO of Itella, and the Managing

Director is Kristiina Helenius. AmCham’s Board of Directors is comprised of the following members:

Chairman: Heikki Malinen - CEO, Itella

Vice-Chairman: Petteri Kilpinen - CEO and Chairman of the Board, TBWA\Helsinki

Members: Clarisse Berggårdh - CEO, Sanoma Magazines Finland

Risto Honkanen - Senior Vice President of Sales, Mandatum Life

Jyrki Ovaska - President, Paper Business Group, UPM-Kymmene

Suzanne Innes- S t u b b - Counsel, White & Case

Tomi Vahevaara - Managing Director, Eli Lilly Finland

Susan Sheehan - Vice President, Communications, Nokia Corporation

Mikko Suonenlahti - Partner, DFJ Esprit

Tuomo Haukkovaara - General Manager, IBM Finland

Anni Ronkainen - Country Manager, Google Finland

Peter Vesterbacka - Mighty Eagle, Rovio Mobile

Pasi Hurri - CEO, BaseN

Nicholas Kuchova - Regional Senior Commercial Officer, US Embassy (Honorary)

About the Policy Committee

AmCham’s Policy Committee is responsible for identifying issues in the business environment that

affect member companies, making suggestions, and conducting a dialogue with decision-makers

and the media. The committee is made up of senior representatives from AmCham member

companies, and is chaired by Max Mickelsson of Microsoft. The members are as follows:

Chair: Max Mickelsson - Government Affairs Lead, Microsoft

Vice-Chair: Teppo Rantanen - CEO, Deloitte & Touche

Members: Ilpo Tolonen - Managing Director, MSD Finland

Jarmo Alm - Senior Vice President, Stora Enso

Leena Munter - Managing Director, Manpower

Bill Östman - Managing Director, Thermo Fisher Scientific


Hanna Laurén - Director, Public Affairs, Hill+Knowlton Strategies

Mikko Torikka - Editor-in-Chief, Tietoviikko & MPC, Talentum

Mika Rossi - Director, Accenture

Niko Palosuo - Head of Communications, Nordic Region, Bayer Nordic

Sirpa-Helena Sormunen - General Counsel, Patria

About the 2013 Policy Platform

This 2013 Policy Platform has been drafted by the AmCham secretariat on the instructions of the

Policy Committee, and is intended to provide decision-makers and the general public with

information about AmCham’s views on certain key issues that have been identified as priorities. We at

AmCham Finland hope that you will consider the recommendations within. The AmCham secretariat

would like to thank the members of the Policy Committee for volunteering their time and expertise to

the development of this platform.

Contact

Matthew Wood, Economic Policy at AmCham Finland

Tel: +358 45 201 1039

Email: matthew.wood(at)amcham.fi

AmCham Finland policy objectives, 2013

1. Increase Foreign Direct Investment in Finland

2. Encourage innovation by reforming taxation

3. Take measures to address the demographic shift and

Finland’s aging population

4. Develop the relationship between education and employment

5. Continue to strengthen existing relations between Finland and

North America


Increase Foreign Direct Investment in Finland

AmCham Finland’s top policy priority continues to be increasing both the quantity and quality of

Foreign Direct Investment (FDI) in Finland. FDI is defined as long-term investment in productive

assets that comes from outside the country, and it brings stable capital flows, more funding for

Research and Development, and higher export volumes. Multinational firms in Finland tend to pay

higher salaries and provide employees with more opportunities for training. Increases in FDI are

strongly correlated with an increase in per-capita GDP, and although foreign enterprises in Finland

represent only 1% of all firms, they account for 20% of GDP and 15% of all employment.

While Finland still lags behind its Nordic neighbors when it comes to FDI attraction, the last two years

have been characterized by positive developments. For example, according to a 2012 report by

Greater Helsinki Promotion, the number of foreign direct investments in Finland in 2011 grew by

170%, and the Helsinki region was the top Nordic regional location for the first time. While this only

tracks the number and not the size of investments in the region, it is still a step in the right direction.

Following the release of the Eloranta Commission’s report in February 2012, the Ministry of

Employment and the Economy began work on a national foreign direct investment strategy – a

measure first proposed by AmCham Finland in the 2011 Policy Platform. The strategy was released in

September 2012, and included many of AmCham’s recommendations for developing the market as a

destination for FDI. In addition, the Team Finland concept for improving Finland’s exports and

internationalization was launched this year, and is an important development for all firms with a stake

in Finnish business.

The Board and Members of AmCham Finland would like to thank the Government for its

commitment to our shared goal of increasing investment in Finland, and we hope that this productive

situation will continue in the future.

Recommendations

• Ensure the full support of all departments and branches of the Government for the first-ever

national FDI attraction strategy

• Implement the recommendations of the Eloranta report in order to ensure that this valuable

effort does not go to waste

• Promote concrete measures to further the objectives set for Team Finland


Encouraging innovation by reforming taxation

Taxation is one of the key levers by which the Government can influence Finland’s attractiveness as

an investment destination, and in doing so affect the willingness of innovative companies to invest in

Finland. This country is highly ranked in many global competitiveness surveys, and it’s important that

the tax system keeps pace with the innovative economy. In 2012, the Finnish Government proposed

a deduction for Research and Development (R&D) expenditures, which is a step in the right direction.

However, there are several restrictions that limit the effectiveness of this deduction, such as a

€400000 cap. This ensures that the vast majority of foreign firms in Finland, those firms that spend

the most on R&D, are excluded. Removing this cap on deductions would ensure that this measure is

as effective as possible.

AmCham Finland supports the introduction of a patent box regime, similar to the model that has now

been implemented in Belgium, China, France, Luxembourg, the Netherlands, Spain, Switzerland, and

the UK. In particular, we recommend that the Dutch Innovation Box be used as the model for the

Finnish scheme.

This model has been highly successful in attracting lucrative R&D activities – so effective that a study

by the UK’s Institute for Fiscal Studies indicates that Finland could lose up to 50% of its share of new

patents if it does not take steps to improve its competitiveness. Along with these new patents,

Finland would lose the public and private income associated with them. This would be a huge blow to

the Finnish economy, and particularly to highly innovative companies.

Dutch Innovation Box

• Applicable to income earned from a self-developed patent

• Reduces effective corporate income tax rate to 5%

• Losses deductible against the regular income tax rate of 25.5%

• No cap on the amount of applicable income


Recommendations

• Commit to 4+ years of stable tax architecture, allowing businesses to plan more accurately

for the future. The current taxation policy is seen to be fluctuating and lacking sustainability,

and it is difficult for companies doing business in Finland to estimate their future tax burden.

As such, decisions such as budgeting and staffing cannot be made with any degree of

certainty.

• Expand the R&D tax credit to apply to large firms. These firms spend the most on R&D, and

the current proposal ensures that they can’t take full advantage of Finland as a location for

their R&D activities.

• Provide tax relief for innovative companies, using the Dutch Innovation Box as a model. Under

this regime, income derived from R&D activities is taxed at 5%, rather than the usual rate of

25.5%, for qualifying companies. This offers a significant incentive for companies to develop

intellectual property through local research and development, and allows these companies to

put more of their invested capital back into the business.

• Allow the deferment of capital gains taxation, provided that the funds are reinvested into a

new business. This will increase the availability of private venture capital funding for Finnish

companies, and make it more likely that these companies will be able to succeed.

• Support an EU-wide program for stock options. As per the European Commission, stock

options give employees a stake in their companies, tie employees to their employers, and

enable small, quickly-growing companies to compete for top talent with attractive

remuneration packages.

Take measures to address the demographic shift and Finland’s aging population

One of the most serious problems currently facing the Finnish state is the demographic shift.

Finland’s population is aging faster than any other European state, putting stress on the welfare state

due to the shrinking workforce that is being counted on to provide the tax base. McKinsey estimates

that Finland needs to attract 185,000 immigrants by 2020, and employ them, in order to keep the

workforce at its current levels. The size of the workforce has been decreasing since 2004, and will

have decreased by between 270,000 and 320,000 persons if the current situation persists.

The Nordic Model depends on a growing population to support a generous system of social welfare,

and considering the significant obligations of the Finnish state with respect to pensions and


healthcare expenditures, the lack of healthy, employed adults is concerning. Unfortunately, there has

been little action up to this point that has been aimed at making the structural improvements that are

needed to ensure the continued viability of the Finnish system – a system that has many benefits.

The amount of time spent in working life must be increased by ensuring that students enter the

workforce earlier, reducing hours lost to disability and illness, and increasing the average retirement

age. AmCham Finland presents its recommendations below.

Recommendations

• Increase the motivation to work and reduce disincentives to finding gainful employment.

Although an effective safety net is crucial to the economic success of any compassionate

state, there are efficiency improvements to be made.

• Take steps to reduce the need to take early retirement due to long-term illness. While

industry has changed significantly in just the past 50 years, the structure of working life and

management styles has not followed suit. The government should consider adopting labor

legislation to the realities of modern employment, and update restrictions on employment

conditions.

• Continue to reform the retirement and pension benefits system. Although the 2005 reforms

have managed to increase the average retirement age by 1.5 years, this increase is still

insufficient when compared to the increase in life expectancy and medical expenditures.

Wages for working pensioners could be taxed at a lower rate, and there should be weaker

incentives for taking early retirement.

• Reduce the time spent in education to a level closer to the OECD average. The average

Finnish student spends more than 21 years in education – four years longer in education than

the OECD average, and more than any other OECD country.

• Consider adopting a points-based immigration system modeled after the Canadian system

that was introduced in 1967. This has been shown to provide a steady stream of skilled

immigrants – a stream that is needed to maintain the size of the workforce in Finland. A

Finnish model could consider the needs of businesses on an annual basis when determining

the allocation of points, and create a “fast-track” process for highly-skilled immigrants; for

example, scientists, entrepreneurs, and internal transfers.


Develop the relationship between education and employment

In order to ensure that the Finnish economy can grow in a difficult economic situation, improving the

relationship between education and employment must be considered crucial. The oversupply of low-

or wrongly-skilled workers generates underemployment and unemployment, and the lack of highly-

skilled workers makes it difficult for companies in Finland to find the right employees. Multinational

firms that have been in Finland for decades are uncertain about whether they can continue their

operations in Finland without a talent pool that matches their needs. If these companies leave, they

may never return.

Long-term unemployment is also a serious problem, and it is estimated that it has increased by a full

percentage point in Finland as a result of the financial crisis (2007-2012), while total unemployment

has increased by an estimated 3.5 percent. Much of this long-term unemployment has a tendency to

become structural unemployment, which exerts downward pressure on wages and inflation. The key

to solving these problems is to ensure that Finnish educational institutions are preparing students for

the jobs that are available, and this requires a healthy cooperation with industry. Our

recommendations are below.

Recommendations

• Increase cooperation between the education sector and private industry. At present,

employers in Finland are not always satisfied with the quality of the graduates that are leaving

Finnish institutes of higher education. Finland is producing an oversupply of graduates in

certain fields, and an undersupply in others. Industry groups could be consulted on a periodic

basis regarding their employment requirements over a certain period of time, and the state

could allocate places in education accordingly.

• Encourage international students to find employment in Finland following their studies, and

ensure that their residence permit status allows them an adequate amount of time to do so.

Currently, after educating international students here in Finland at a cost of nearly €15,000

per year, per student, graduates are required to find a job within six months or leave the

country. This results in a massive lost investment by the Finnish society.

• Ensure the extension of state subsidies for foreign-language private schools. Unlike their

cousins abroad, Finnish private schools are non-profit and receive most of their funding from

the government. They are a significant factor in attracting and keeping foreign talent in

Finland, they are run at lower average operating costs than public schools, and cutting their

budgets would realize limited cost savings.


Continue to strengthen existing relationships between Finland and North America

The transatlantic economy, as the economic relationship between Europe and the United States is

known, is the largest and most important economy in the world, and Finland does not currently take

full advantage of the links. Finnish firms have invested approximately five times more in the United

States than American firms have invested in Finland, and this is expected to continue. Finland has a

great deal to offer to the world, and there is much to be gained by improving links between the two

nations. However, there are still some barriers.

In 2012, Finland was listed for the fourth consecutive year on the United States Trade

Representative’s (USTR) Special 301 Watch List, and all signs indicate that this will be the case again

in 2013. This list identifies countries that do not provide adequate protection for Intellectual Property

Rights (IPR). Finland is on the list due to the expanded generic substitution system for

pharmaceuticals which are protected by analogue process patents. This system was introduced by

the Finnish government in 2009, and hurts innovative industry and investment to Finland by

representing Finland as a poor environment in which to do business. We hope that the government

will consider a solution that will satisfy all parties and that will result in Finland being removed from this

list as soon as possible.

The Finnish defense and security industry consists mainly of small- and medium-sized companies

which have high level expertise in very specialized areas. There is a need to promote these Finnish

proficiencies and niche capabilities in American defense industry projects. In defense and security

materiel cooperation, there is also a need to open markets, especially in the area of exports from

Finland to the US.

Recommendations

• Strengthen domestic patent protection in order to attract business and encourage

innovation in Finland. Finland’s presence on the Special 301 Watch List is a barrier to the

improvement of relations between the US and Finland, and is negatively affecting Finland’s

ability to attract foreign investment.

• Consider Finland’s accession to NATO on the basis of the significant economic benefits that

would result from membership. AmCham Finland supports the creation of new business

opportunities for both US and Finnish firms, and full membership would give Finnish industry

an equal position and more opportunities in the European and transatlantic markets.


Currently, Finnish industry is unable to participate in many programs that are restricted to

NATO members.

• Encourage business delegations to the United States, such as the AFDA (Association of

Finnish Defense and Aerospace Industries) delegation to Washington, DC in November 2011.

These trips help to develop valuable business relationships between the US and Finland,

leading to economic growth in both countries.

• Work to remove restrictions on Finnish defense exports to the United States and “normalize”

relations. There are some rules, laws, and other barriers which make it difficult for Finnish

companies to export to the US, and these issues should be solved in order to further develop

transatlantic business.

• Ensure that Finnish students are aware of and able to access the educational opportunities

available in the United States and Canada. Many of the world’s top universities are located in

the US, but in 2011, only 370 Finnish students were studying in American universities. More

resources and better practices are needed to make it easier for Finnish high-school students

to pursue their studies in North America.


Documents

2013 AmCham Policy Platform