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Sweden eyes new round of income tax cuts

Sweden's Financial Markets Minister said on Wednesday the country would benefit from further income-tax reductions, as he addressed investors in Stockholm, but added that unemployment was Sweden's "Achilles' heel".

Published: 29 May 2013 11:40 CEST
Sweden eyes new round of income tax cuts

With a bit over a year left until general elections in Sweden, Peter Norman said his government hoped to introduce a fifth reduction to income taxes in Sweden before their current term in power expired.

“There have to be even clearer differences between working and not working,” Norman told Swedish finance professionals at the SvD Investor Summit in Stockholm on Wednesday.

“That’s why we hope to be able to introduce a fifth income-tax reduction if the economy permits it. The Achilles’ heel is unemployment, we need structural reform.”

The Alliance government coalition has spearheaded tax reductions since taking power in 2006, with proponents stating that an increase in disposable income would spur on consumption and growth. Whether or not the reforms would be added to with a fifth income-tax cut was hotly debated at last year’s political conference in Almedalen.

Looking at the many struggling economies worldwide, meanwhile, Norman underscored that Sweden’s relative strength meant the country had a singular opportunity to make investments at home.

“We are unique in the economic world today, because right now we can talk about investments,” Norman said, adding that things were looking up in Europe overall compared to one year ago.

“Our autumn budget included long-term ventures with reduced company tax and investments in education and infrastructure,” he said.

His address at the SvD Investor Summit coincided with an optimistic growth forecast from Statistics Sweden, that outpaced a previous prediction from Reuters.

GDP has already climbed 0.6 percent in the first quarter of 2013, far outstripping the more modest predictions that Sweden would see a 0.3 percent growth in the first three months. The new performance expectation predicted a 1.7 percent growth for the year.

SEB Bank economist Olle Holmgren welcomed the news but told the TT news agency that it was not yet enough for his bank to lower interest rates. He also warned against placing too much hope on the predicted growth rate.

“It shows that Sweden is faring better than the rest of Europe, but the overall picture is still that we will have lower growth than usual this year.”

TT/The Local/at

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TAXES

Beskæftigelsesfradraget: What is Denmark’s employment allowance?

Denmark's government may soon announce changes to its tax reform plans, which will give all wage earners a bigger employment allowance. What is this and how will it affect foreigners' earnings?

Published: 30 October 2023 15:21 CET
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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