The municipalities (Finnish: kunta; Swedish: kommun) represent the local level of administration in Finland and act as the fundamental, self-governing administrative units of the country. The entire country is incorporated into municipalities and legally, all municipalities are equal, although certain municipalities are called cities or towns (Finnish: kaupunki; Swedish: stad). Municipalities have the right to levy a flat percentual income tax, which is between 16 and 22 percent, and they provide two thirds of public services. Municipalities control many community services, such as schools, health care and the water supply, and local streets. They do not maintain highways, set laws or keep police forces — these tasks are the responsibility of the central government.
Municipalities have council-manager government, i.e. they are governed by an elected council (kunnanvaltuusto, kommunfullmäktige), which is legally autonomous and answers only to the voters. The size of the council is proportional to the population, the extremes being 9 in Sottunga and 85 in Helsinki. A subsection of the council, the municipal executive board (kunnanhallitus), controls the municipal government and monitors the implementation of decisions of the council. Its decisions must be approved by the council. Unlike national cabinets, its composition is derived from the composition of the council, not along government-opposition lines. Furthermore, individual decisions are prepared in specialized municipal boards (lautakunta) for a council meeting; these include e.g. zoning, social assistance, and education boards. Council, executive board, and municipal board memberships are elected positions of responsibility, not a full-time job.
Municipal managers (kaupunginjohtaja, stadsdirektör for cities, kunnanjohtaja, kommunsdirektör for other municipalities) are civil servants named by the council. The city manager of Helsinki is called ylipormestari/överborgmästare "Lord Mayor" for historical reasons. There were previously no mayors in Finland, but after a change in law, Tampere was first city to elect a mayor (pormestari/borgmästare) in 2007. The mayor is not, however, currently elected directly, but by the municipal council. The mayor acts as municipal manager and as a speaker of municipal council.
Although municipalities do not have police or legislative powers, local ordinances concerning traffic can be set, and municipal parking inspectors can give parking tickets. Municipalities are legal persons and can appear in an administrative court. Likewise, the state of Finland is a separate legal person.
Excluding judicial review of formal compliance to administrative law, municipalities are independent and not a part of a local state hierarchy. Municipalities cooperate in regions of Finland. State agencies have jurisdictions spanning one or more regions: each region is served by an ely-keskus (elinkeino-, liikenne- ja ympäristökeskus) on matters of employment, the economy, transport and environment, while law and environmental enforcement is handled by the local aluehallintovirasto, governing multi-region jurisdictions termed alue.
Residents pay a municipal tax that is a form of income tax, which is the mainstay of the income of a municipality (42% of income). Municipal tax is nominally a flat tax that is levied from a broader population (including lower income levels) than progressive state income tax, which is collected only from medium to high income earners. However, in practice even the municipal tax is progressive due to generous deductions granted to the lowest income levels. The pre-deduction base tax varies from 16% in affluent Kauniainen to 20% or more in a number of small rural municipalities. Next to the municipal tax, municipalities receive funding from the state budget (valtionapu, 19% of income). This funding is means-tested to municipality wealth and serves to balance the differences in municipal tax revenue. Besides taxes, sales revenue, fees and profit of operations also form a substantial share of municipal income (21%).
Additionally, municipalities levy a property tax, amounting to 3.6% of income, which is comparatively low: the annual fee is 0.32-0.75% of net present value for permanent residences and 0.50-1.00% for leisure properties like summer cottages as well as undeveloped plots. Municipalities receive a share of corporate tax revenue (yhteisövero) from companies having a place of business in the municipality (3.8% of income).
Some municipal functions receive direct funding both from the municipality and the state, e.g. AMK vocational colleges.
Although municipalities are responsible for their own finances, there is much highly specific legislation and regulation that requires the services to be provided up to a standard. Thus, although municipalities have the power to voluntarily spend tax-generated income, they are required to first allocate funds to legally prescribed services.
Municipalities may provide some of these services through corporations that they own or from private companies that they regulate. For example, Helsinki Regional Transport Authority (HSL) provides public transport services in the capital area.
As of 2017[update], there are 311 municipalities in Finland, of which 106 are cities. As of 2017[update], 16 municipalities are unilingually Swedish (all in the autonomous Åland region). 33 municipalities are bilingual: 15 with Swedish as the majority language (all but four in Ostrobothnia) and 18 with Finnish as the majority language (all but five in Uusimaa region). Four municipalities in northern Lapland (Utsjoki, Inari, Sodankylä and Enontekiö) have two or all of the three Sami languages spoken in Finland as an official language.
Although there are exceptions, the line between a city and a small town or rural municipality can be drawn at the city of Hamina with 20,554 inhabitants. In the population ranking, above Hamina there are only cities (and their surrounding areas). However, there are many cities with much smaller populations than Hamina. Finland's smallest city, Kaskinen, dates back to 1785 but had a population of only 1,276 (31 August 2017).
The areas of the municipalities vary, as the population is the primary criterion for forming a municipality. The largest are found in Lapland, of which the largest is Inari at 17,333.65 km2 (6,692.56 sq mi) (130 km square). The smallest municipalities are very small towns. Kaskinen is an independent town with a land area of only 10.49 km2 (4.05 sq mi). Kauniainen, which was originally a corporation in Espoo, is only 6.00 km2 (2.32 sq mi).
Municipalities were originally parishes. The old word for a municipality is pitäjä, 'keeper', because when the system was instituted, one municipality kept one minister. Municipalities were divided into villages, which consisted of individual properties. Borders between properties and thus municipalities were defined by oral agreements passed down from generation to generation; usually along straight lines between defined markers such as boulders. Medieval documentation survives only from legal disputes concerning borders. Furthermore, the secular government divided the properties to taxable units (villages and secular municipalities) according to its own convenience; thus, they not necessarily convergent with parishes. Furthermore, cities were chartered separately. Up to 1734, the law was different in cities than in rural municipalities.
In 1865, the modern municipalities were established as secular entities separate from the parishes. The reform was inspired by the Swedish municipal reforms of 1862. Up to 1964, cities financed their own police and registry services. Until 1977 municipalities were divided into cities (kaupunki, stad), market towns (kauppala, köping) and rural municipalities (maalaiskunta, landskommun). The market town category was abolished and these were renamed as cities. The rest of the municipalities were classified as 'other municipalities'. All municipalities called maalaiskunta were eventually either merged to their parent cities or changed their names. From 1995 onwards only 'municipality' is recognized by law and any municipality is allowed to call itself a city.
Not all municipalities have an obvious urban center; indeed, rural municipalities are often composed of distributed rural villages. Although the church village (kirkonkylä, abbreviated kk) is the historical center, the largest or administrative center may be in another village. For example, Askola has a church village (Askolan kirkonkylä), but its administrative center is in Monninkylä. Often, the church village has the same name as the municipality, as with Askola. However, this is not necessarily so, e.g. Enontekiö is governed from Hetta; these villages are often erroneously labeled in maps. This is expected as the name of the municipality refers to the entire parish, not just a single center like a church village. Villages have no administrative role, although some have voluntary village associations (kyläyhdistys) and other non-governmental public life.
Although related, urban areas in Finland (taajama) are not local administrative units. A catalog is independently compiled each year by Statistics Finland, a state agency, and used primarily for traffic-related purposes (signage, speed limits, and highway planning). There are 745 officially recognized urban areas in Finland, 49 of which have more than 10,000 inhabitants and six more than 100,000.
Each municipality has a distinct coat of arms. They are posted on the municipal borders and shown in official documents representing the municipality. The coats of arms for many municipalities have been designed in the modern era, many of them by Gustaf von Numers. In addition, municipalities like Vantaa since 2015 and Helsinki since 2017 have a logo distinct from their coat of arms.
Distinctively, the capital area, or Greater Helsinki, has no special arrangements. The area consists of four entirely independent cities that form a continuous conurbation. Greater Helsinki has grown in population and area relatively quickly: the nearby municipalities, considered rural only 50 years ago, have become suburbs, and the growth is projected to continue. A state-imposed merger of Helsinki and a part of Sipoo, a rural, 40% Swedish-speaking municipality adjacent to Greater Helsinki, was recently approved by the government, counter to the opinion of the Sipoo municipal council. This area will effectively become a new (and Finnish-speaking) suburb with multiple times the inhabitants than there are in Sipoo.
There is currently a heated political debate in Finland about reforming the municipality system. Essentially, a large number of small municipalities is seen as detrimental to the provision of public services, having originated during Finland's agrarian years. As a result, there have been suggestions of state-imposed mergers. A committee led by the former Minister for Regional and Municipal Affairs, Hannes Manninen, suggested creating a two-tier system of municipalities with different powers, while the Association of Finnish Local and Regional Authorities (Kuntaliitto) favoured a system where municipalities would be units of at least 20,000–30,000 inhabitants, cf. the current median at 4,700. The motion was inspired by a similar reform in Denmark (see Municipalities of Denmark). The former government (Vanhanen II), however, planned to not impose mergers.
Recently, a large number of voluntary mergers have been agreed on. Ten mergers were completed in 2005, one in 2006, 14 in 2007 and one in 2008. In 2009, there were even more, many of which consolidated more than two municipalities. Several cities merged with surrounding rural municipalities in Hämeenlinna, Salo, Kouvola, Seinäjoki, Naantali, Kauhava, Lohja, Raseborg, Jyväskylä and Oulu in 2009. In total, there were 32 mergers, involving 99 municipalities, that reduced the number of municipalities by 67. The year 2009 also marked the end of the last maalaiskunta, a municipality surrounding a city but sharing the name, in Jyväskylä. There were four mergers in 2010, six in 2011, ten in 2013, three in 2015, four in 2016 and two in 2017. In the period 2005-2017, the number of municipalities was voluntarily reduced from 444 to 311.
In 2012, Katainen's government published an extensive plan aiming at merging municipalities to reach a target of population 20,000 per municipality. Commuter belts have also been proposed as a target by a government committee, such that municipalities where more than 35% of workforce commutes would be subject to a merger.
The Sipilä cabinet, from 2015, has been preparing a significant reform of health and social services (sote-uudistus), aimed at increasing choice between municipal and private healthcare, and assigning some healthcare responsibilities into larger units than a municipality.