ACQUISITIONS Finnish forests by foreign institutional investors will be limited by a legislative amendment approved by the government at its new framework session, reports YLE.
The amendment will prevent forest funds from benefiting from a tax deduction for the cost of acquiring forest areas that was intended for private forest owners.
Minister of Agriculture and Forestry Jari Leppä (Center) revealed to the public broadcaster that the amendment is due to pass early next year. “We decided during the session to limit the possibilities of forestry funds to use the deduction,” he confirmed, adding that the decision fills a loophole in the income tax regime that had been exploited by at least some forest funds.
The need for the amendment stems from concerns about national forests ending up in the ownership of faceless, profit-oriented foreign investors, summary Mikko Tiirola, the president of the Central Union of Agricultural Producers and Forest Owners (MTK).
“The activity in the market has been absolutely wild in recent years, with a number of foreign players in the mix as well,” he said.
Funds and institutional investors have used their resources and various tax advantages to accumulate up to half of the forest area entering the market in recent years, according to MTK. In Kainuu and North Karelia, as much as 80% of the land sold has been acquired by forestry funds and investors.
“The funds have discovered a loophole in the legislation. Some funds have acquired forest areas to become owners of the condominium forests that they have created, ”Tiirola said.
Lawmakers, he said, introduced the deduction primarily for individuals, estates and co-owned forests: “It was certainly not intended for businesses or funds.”
The instrument allows forest owners to deduct 60 percent of the costs of purchasing forests from income from forestry activities.
Tiirola recalled that the assets of a forest fund can be transferred to foreign ownership in a single transaction, as evidenced by recent sales of two funds: Taaleri has sold 14,000 hectares of forest to France and United Bankers over 18,000. hectares to Germany. The problem, he explained, is that because funds seek to maximize their return on investment, an increase in their holdings may not promote forest biodiversity, for example.
Problems related to the lack of a face and short-term interests of owners, meanwhile, have already been seen in the area of power grids, he added.
Leppä believed that the legislative change will limit the phenomenon at least to some extent. “This is the first step in this direction. We will weigh additional measures if necessary, ”he told YLE.
Finnish Forest Industries cautioned against overestimating concerns. Director Karoliina Niemi recalled that funds are usually a form of ownership that works well, as their pursuit of operational efficiency ensures that forests are well managed. She also felt that forestry funds only benefited from the tax deduction to a limited extent.
“The most important thing is that forests are managed actively, responsibly and patiently, and that the timber trade works,” she stressed, drawing attention to the importance of securing raw materials for the industry. forest industry.
Buyers’ motivations can also vary, according to Tiirola.
“Are they related to offsetting for emissions trading or to security policy, for example?” Either way, the intergenerational aspects and the commitment to the locality are not up to the hunting clubs, ”he said.
He also felt that the amendment alone would not solve the problems, saying the government should start designing a broader reform of forest taxes to harmonize the tax treatment of funds and private owners.
“We would be a long way off if the tax percentage was the same for everyone,” he said.
Aleksi Teivainen – HT