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Sweden to cut corporate tax rate

The Swedish government announced plans on Monday to introduce 16 billion kronor ($2.4 billion) worth of relief for Swedish business through business tax cuts and a reduction in social fees.

Published: 8 September 2008 14:32 CEST

Sweden to cut corporate tax rate

Sweden’s centre-right coalition government said it would cut the corporate tax rate to 26.3 percent from 28 percent from 2009.

This will cost around 7.0 billion Swedish kronor. The government also said it would reduce the social contribution fees paid by employers by around 1 percentage point and make it less expensive to employ young people.

The government said it would finance the bulk of the cuts by making adjustment to the tax system which currently allow companies to reduce their tax burden by taking advantage of existing loop holes.

“Corporate tax is one of the taxes which large companies really study when they plan to set up business somewhere,” said Liberal Party (Folkpartiet) leader Jan Björklund at a press conference at Tobii Technology in the Stockholm suburb of Danderyd.

Sweden’s corporate tax rate has held steady at 28 percent since 1995 and at the time it was low in comparison with other countries in Europe.

Since then, other countries have reduced their own corporate tax rates, bring the average in western Europe to 26 percent, according toBjörklund.

Beskæftigelsesfradraget: What is Denmark's employment allowance?

What is the employment allowance?

The Beskæftigelsesfradraget (from beskæftigelse, meaning employment, and fradrag, meaning rebate) was brought in by the centre-right Liberal Party back in 2004, the idea being that it would incentivise people to get off welfare and into a job.

Everyone whose employer pays Denmark’s 8 percent AM-bidrag, or arbejdsmarkedsbidrag, automatically receives beskæftigelsesfradraget. Unlike with some of Denmark’s tax rebates, there is no need to apply. The Danish Tax Agency simply exempts the first portion of your earnings from income taxes.

In 2022, beskæftigelsesfradraget was set at 10.65 percent of income with a maximum rebate of 44,800 kroner.

How did the government agree to change the employment allowance in its coalition deal?

In Responsibility for Denmark, the coalition agreement between the Social Democrats, the Liberals and the Moderate Party, the new government said it would set aside 5 billion kroner for tax reforms.

Of this, 4 billion kroner was earmarked for increasing the employment allowance, with a further 0.3 billion going towards increasing an additional employment allowance for single parents.

According to the public broadcaster DR, the expectation was that this would increase the standard employment allowance to 12.75 percent up to a maximum rebate of 53,600 kroner.

How might this be further increased, according to Børsen?

According to a report in the Børsen newspaper, the government now plans to set aside a further 1.75 billion kroner for tax reforms, of which nearly half — about 800 million kroner — will go towards a further increase to the employment allowance.

The Danish Chamber of Commerce earlier this month released an analysis in which it argued that by raising removing all limits on the rebate for single parents and raising the maximum rebate for everone else by 20,300 kroner, the government could increase the labour supply by 4,850 people, more than double the 1,500 envisaged in the government agreement.

According to the Børsen, the government estimates that its new extended allowance will increase the labour supply by 5,150 people.

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