Tuesday, April 13, 2021
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Sweden – one hundred percent tax?


The Swedish model has worked well for many years thanks to high taxes and post-war strong economic growth. In 1954, the Social Democrats made an advertising film for the election campaign. It was called “Skattefria Andersson”, or more or less “Kowalski in the country without taxes”. When Andersson in his dreams did not have to pay a single crown in the form of a tax and could stand “on his feet”, as demanded by the right-wing parties, it turned out, among other things, that there were no roads in the country by which Andersson could go to work and earn your tax-free money. His Volvo got stuck in the field, causing the audience to laugh out loud. Of course, roads are built with taxpayers’ money.

In this spirit, Swedish public opinion was agitated for taxes, asking: “do you want to have schools for your children”, everyone wanted, “do you want to have health care”, everyone wanted it too.

– Okay, how are we supposed to finance it? However, since “everyone” had already agreed that they wanted both this and that, the door handle seemed to have fallen and all that was left was to pay the tax.

Taxes in Sweden during this period were undoubtedly one of the highest in the world. Enterprises paid 55% of their net profit to the state treasury, although at the same time they had significant investment reliefs. Until 1989, the tax on the income of citizens was characterized by high progress, which meant that at some point it was no longer profitable to work additionally. The well-known Swedish economist Assar Lindbeck drew attention to the negative aspects of such a tax system. In his opinion, it had a drastic impact on the situation of families who delegated some of their functions to public institutions. The individual had a limited ability to influence his life situation.

Lindbeck called it “learned helplessness.” Honesty is very expensive in this situation. At the same time, politicians tried to combat the declining fairness of society by developing more and more the control system. Lindbeck also accused the Social Democrats of constantly changing the rules of the economic game, which meant that a person never knew whether it is worth working at a given moment, whether it is worth taking an allowance or saving in a bank, or on the contrary – taking a large loan from a bank for forty years to buy a house. because there are good options for tax deductions from the interest on the loan. Motivation to act rationally, such as going to work to earn money, was waning.

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The 1990 tax reform was intended to preserve the relationship between work and pay, and ensure that everyone was more equal by paying roughly the same percentage of income in the form of tax, up to a certain income ceiling. Today it amounts to around 30% and it is the so-called municipal tax. Above a certain income limit, a tax is still paid to the state. In Sweden, 85% of taxpayers pay only the municipal tax, i.e. their income does not exceed the ceiling on which the state tax is additionally imposed. (On top of that, there is also a small tax for the benefit of the Church of Sweden.)

The specificity of Sweden, however, lies in the fact that very rich people and big companies can avoid paying taxes, or drastically reduce their size by investing their capital and registering companies outside Sweden. Example? For example IKEA. In this way, the burden of paying taxes falls mainly on the middle class. The lower class, on the other hand, receives a kind of “tax refund” in the form of benefits, eg as a subsidy to rent for an apartment. The unemployed receive benefits through participation in trade unions.

Of course, the tax base can be reduced, especially if someone runs his / her own business, by means of various deductions, such as commuting, business phone bills or deductions from bank interest rates. There are quite a lot of possibilities in this regard, which on the one hand makes it much more complicated to fill in the declaration, but on the other hand it gives hope for a refund of overpaid tax.

There are generally two types of forms – one simplified for people in the case of whom there is no doubt what income they have and what tax they will pay. Such a form should only confirm the compliance of the data. The second form is intended for people with more complicated incomes and deductions. (Other forms are valid in the case of running a business.)

– When introducing the new system, the Social Democrats were worried about whether the reform was really just and whether it was thus an “expression” of the social democratic partition policy, recalls the “father” of the reform, then Finance Minister Kjell-Olof Feldt in his memoirs. These doubts resulted from the fact that the Social Democrats, while carrying out the reform, wanted to “outbid” the right wing, which had been demanding a reduction in taxes for years.



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