Posted on 03/28/2007 5:55:23 PM PDT by WesternCulture
Sweden will abolish its wealth tax this year to boost investments and create jobs, Prime Minister Fredrik Reinfeldt said Wednesday, the latest in a slew of reforms announced since his centre-right government ousted the Social Democrats from power six months ago.
The move was broadly welcomed in political and business circles.
"We will propose to abolish wealth tax as of 2007 in our spring budget bill," Reinfeldt, the leader of the conservative Moderate Party, wrote in an article published in daily Dagens Nyheter.
The article was co-signed by the heads of the three other government coalition partners, Maud Olofsson of the Centre Party, Lars Leijonborg of the Liberals and Göran Hägglund of the Christian Democrats.
The spring budget bill, to be presented to parliament on April 16, is traditionally a revision of the autumn budget.
The move is aimed at attracting risk capital investments, which would helpcompaniesgrow and increase employment, the government said. Job creation has been the centre-right government's primary objective since coming to power.
"We hope to give a boost to the desire to invest in Sweden, in order to create conditions for new, expansive companies and create more new jobs," the four party leaders wrote.
They quoted tax authorities as saying that Swedish capital worth about 500 billion kronor ($72 billion) is currently placed abroad for tax reasons.
Finance Minister Anders Borg said Sweden also needed to keep pace with developments in other countries.
"When one country after another abolishes wealth tax, and we are left as one of the few countries to still have it, then you have to take this kind of decision," he said.
The government said that of the 30 members of the Organisation for Economic Cooperation and Development (OECD), only five countries – France, Norway, Spain, Sweden, Switzerland – still have wealth tax.
Wealth tax was introduced in Sweden in 1947. In 2005, the state yielded some 4.8 billion kronor ($688.2 million) in revenues from the tax. Some 225,000 people pay the tax, representing about 2.5 percent of the population.
The tax is equivalent to 1.5 percent of wealth exceeding 1.5 million kronor for singles and 3.0 million kronor for couples.
However, some of the country's richest entrepreneurs have been exempt from wealth tax since 1997 – including the family that controls Swedish cheap and chic fashion retailer H&M – since they threatened to leave the country and take their companies with them if they were forced to pay millions of dollars in wealth tax.
The abolition of the tax is expected to be adopted in parliament, where the four coalition partners hold a majority.
The measure will be compensated by a decrease in the tax break granted to private pension savings.
An employee earning up to 400,000 kronor a year can deduct about 20,000 kronor for money invested in a private pension fund. The government will now cap deductions at 12,000 kronor per person per year.
Since taking power after September's elections, the centre-right government has introduced a series of measures aimed at getting Swedes into the workforce, including a reduction of unemployment insurance and higher union fees, as well as a tax break on home help.
It has also proposed the sale of the state's holdings in six companies.
Those measures caused a storm of controversy from the opposition and unions, and the government's popularity suffered as a result.
By contrast, the wealth tax move has been widely welcomed, though not all approve of the methods used to get rid of it.
The powerful Confederation of Swedish Trade Unions, LO, which has close links to the opposition Social Democrats, said it was "unacceptable" that pension savers have to pay the price of the abolition,. The Confederation of Swedish Enterprise hailed the move as a "sensible decision".
Huzzah for Sweden.
Could this move eventually lead to tax reductions for "the average Joe" in Sweden?
So, they're just moving the tax. Not abolishing it.
Governments always have to "pay" for tax cuts somehow, even though it's proven to be not necessary. Zero-sum economics at its worst.
Socialism is not mathematically sustainable?
Where is the "consensus" of scientist refuting this?
"The powerful Confederation of Swedish Trade Unions, LO, which has close links to the opposition Social Democrats, said it was "unacceptable""
Ha,ha, the unions don't like it. Now there's a shock !!!
Stick a fork in them!
Geez,you guys might even get to keep some of your own money huh ???
Reinfeldt has done a marvelous job in his environment. Bravo!
Could this move eventually lead to tax reductions for "the average Joe" in Sweden?
- The main argument for the abolishment is to encourage wealthy people to stay in Sweden and continue investing here and furthermore making Sweden a more attractive country to live and invest in for wealthy foreigners.
If such a development occurs at a greater level, it will, naturally, contribute a lot to the development of our economy and will allow us to lower taxes.
World economy goes up and down and Sweden, being a country of many large export industries, is heavily dependent on the state of the global economy at large, but presently I see no storms on the horizon. Asia is still booming, The US economy is growing steady but at somewhat more modest pace than one or two years ago and the largest economy on earth, the European one, is looking stronger day by day.
In this case, like in many others, a government launches a tax cut/tax abolishment but wishes to avoid appearing 'irresponsible'.
Now, two lines of development are possible.
Scenario A:
If all goes according to plan, the economy will continue to develop nicely and this alone will finance the tax cut to a great degree. A lot of 'moving around' in the budget won't be needed.
Scenario B:
However, if the economy weakens rapidly and unexpectedly, a government will be able to raise taxes or whatever they earlier said they would do in order to 'finance' the earlier tax cut (in order to maintain budget disciple) while simply getting away with reminding everyone they've been saying this latter measurement was going to be necessary all along.
Let's hope for the best. There actually have been politicians in history that have had the guts to lower taxes. Reagan was such a politician - and Reinfeldt and other Swedish Conservatives of his generation grew up admiring him.
Yes, but the article specifically states that the government is offsetting the funds with a reduction of the exemption on pensions.....they're just shifting the tax.
Geez, their definition of rich and my definition differ widely.
"Baby steps in the right direction. I am genuinely happy for the Swedish people."
Not a revolution, but I wouldn't call it baby steps either.
- $145 is $1740 on an annual basis. Now multiply this with the number of workers. Even though Sweden is a small country, you could easily imagine all the fun our politicians deliberately refrain from - like sending money to corrupt Socialist Regimes in Africa that end up on a Swiss bank account, calling it 'foreign aid', etc, etc.
True enough. That is $1,740 that Swedes can put in the bank or spend on goods and services or a combination thereof. Anytime that politicians have less money with which to commit mischief is a good thing.
"Anytime that politicians have less money with which to commit mischief is a good thing"
- Cheers to that!
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