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Finland plans to cut its corporate tax from 24.5 to 20 percent, following in the footsteps of neighbouring Denmark and Sweden, Prime Minister Jyrki Katainen announced on Thursday.
The government said the tax cut would be partially financed by higher taxes on stock dividends, alcohol, tobacco and sweets, as well as a reduction of business subsidies.
The tax cut was announced at a press conference at which Katainen also disclosed measures aimed at reducing Finland's budget deficit.
Sweden cut its corporate tax from 26.3 to 22 percent on January 1, while Denmark last month presented a growth package calling for a progressive reduction in corporate tax from 25 to 22 percent.
The Finnish government's plan deficit cutting plan calls for savings of 600 million euros ($775 million), half of which will be spending cuts and half of which will be financed by the higher taxes.
Finance Minister Jutta Urpilainen insisted that the cuts would not hurt the country's generous welfare state.
"Social security will not be impaired," she said.
Finland's broad coalition government, in power since 2011, already introduced a five-billion-euro savings plan in 2011 and 2012.
In December, the government said it expected a budget deficit of 1.5 percent of gross domestic product in 2013, and said it aimed to put an end to rising public debt in 2014.
The Nordic country, the only member of the eurozone to hold a triple-A credit rating with a "stable" outlook at all three international credit rating agencies, saw its economy shrink by 0.2 percent in 2012.