Three quarters of such dividends are exempted from taxes, while one quarter is subject to the capital gains tax.
Aalto University professor Heikki Niskakangas, a professor of corporate law at Aalto University, said last Wednesday that the proposal could create situations where a business owner is subject to a tax rate of 26 percent on income that would be taxed at a rate of more than 50 percent in the case of a wage earner.
This encourages business owners to take out their earnings as dividends rather than a salary.
The corporate responsibility watchdog's report states that the business owner sets up a holding company that acquires shares in their business to inflate the value of the business based on revenue potential - or 'hopes and predictions', as described by Niskakangas.
This enables business owners to mark up the value so that they can withdraw the maximum of 150,000 euros in dividends.
Three companies have used the arrangement, according to Finnwatch. WTD Media, which is owned by Natalia Salmela, SP Lifestyle, which is owned by Sara and Mikko Parikka, and Auri Kananen, which is owned by Auri Kananen.
Salmela has defended the arrangement on social media. On Instagram, she asked if there were any questions.
Helsingin Sanomat reminded Niskakangas that unlisted corporations in such sectors often need to set up a holding company because they have the necessary wealth to take advantage of the offer to the maximum extent.
During his speech, Kananen said the corporate structure was created with the assistance of a professional to shield against possible legal action in the US. The tax benefits of the arrangement came as a 'bit of a surprise', she said on September 5th in an interview with YLE.
She told the public broadcasting company that resigned, you won't lose all your money but they'll be safe there.
As anentrepreneur, industry lobbyists and policymakers have referred to the preferential tax treatment of dividends as an entrepreneurial incentive that consolidates the solvency of businesses and encourages business owners to accumulate wealth in the business before reaping the rewards of their work at a reduced tax rate, Juha-Pekka Raeste, a political and economic journalist at Helsingin Sanomat, recounted in an analysis on Monday.
This tax break affects entrepreneurs who are rich, successful, or who use different methods to boost the value of their business. The Minister of Finance said in its tax survey for this year that the benefits are enjoyed almost exclusively by entrepreneurs in the highest income decile.
Unlisted companies paid out 2.5 billion euros in dividends that were taxed at a reduced rate in 2021.