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Swedish investor weighs in on financial risks in 2023

What will 2023 be like? What will happen to inflation? How will the war in Ukraine affect the economy going forward? Here's what Swedish investor Christer Gardell, founder and CEO of the fund Cevian Capital, has to say.

Published: 26 December 2022 09:11 CET
Stockholm
Swedish investor Christer Gardell, CEO of Cevian Capital, discusses what to expect in 2023 - in terms of financial risks. Photo by Philip Myrtorp / Unsplash

Looking back on 2022, Gardell believes that the stock market has gotten a little better at taking a beating – compared to two decades ago.

“Once we were out of the pandemic, inflation, energy prices, and a war in the immediate area hit. That is quite a lot of uncertainty at once. If this had happened 20 years ago, there would have been total panic in the stock market. So, the stock market has gotten a little better, I think, at taking a beating.

“During all the strange years when money has cost nothing, quite a few bubbles have been inflated in the system, strange companies that earn nothing and barely have any operations still valued in the billions… And we got strange phenomena like cryptocurrencies and these SPAC companies (special purpose acquisition companies)… Many of these bubbles have been scrubbed away in 2022,” Gardell said.

What will 2023 look like?

Gardell thinks 2023 might start off quite rocky.

“It could be quite dramatic at the beginning, I think. But the recession will surely go away in 2023. It is uncertain how the war in Ukraine will develop… If it escalates, it is a bad scenario, but if there were to be peace, it is clear that it would be favourable for the stock market.

“Those who should be worried are those who had borrowed heavily during the happy days when money was free – the real estate sector and private equity (venture capital companies), as well as telecom companies.

“Other companies that will have a hard time are companies close to consumers. In Sweden, the interest rates hit people immediately, as most people have short-term and variable interest rate loans. Then you have the energy prices. They have a strong dampening effect on purchasing behaviour. It is probably impossible to raise consumer prices anymore, as customers have no money. If you raise the prices, you lose too much volume.”

Inflation changes

The investor believes that the key challenges related to inflation have already been solved.

“We had a whole generation that didn’t know what inflation and interest rates were. Now they know. Now they know that money costs money…

“We see how shipping prices have started to fall, and many raw material prices have also fallen. So, I think the inflation problem is actually solved. The central bank (Riksbank) does not need to intervene anymore,” he concluded.

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WORKING IN SWEDEN

How some highly-skilled foreigners are missing out on tax cuts in Sweden

Foreign researchers in Sweden can in some cases have up to a quarter of their salary exempted from income tax for seven years under Sweden’s 'expert tax' rule, but many people who don’t realise they qualify miss out due to a tight application deadline.

Published: 24 May 2024 10:21 CEST
How some highly-skilled foreigners are missing out on tax cuts in Sweden

Wait, an expert tax? Who qualifies?

In order to qualify for the so-called expert tax, you have to meet five formal conditions.

You cannot be a Swedish citizen and you must not have been listed as a resident in Sweden at any time in the five years prior to your application.

You also can’t have plans to stay in Sweden for more than seven years (although you won’t be penalised later if you do end up changing your mind and staying longer), and you need to work for a Swedish employer, or a foreign employer permanently established in Sweden.

Finally – and this is the crucial requirement for many researchers, who don’t realise they qualify in time – you must submit your application for expert tax relief to the Taxation of Research Workers Board (Forskarskattenämnden) no later than three months after the date you began working in Sweden.

Why don’t they realise they can apply?

Well, the Income Tax Act, which regulates this rule, stipulates that the researcher’s work needs to include “qualified research or development tasks of such nature or at such skill level that there is significant difficulty to recruit comparable personnel within Sweden”. 

This, the Universitetsläraren magazine reports, means that higher education institutions where these foreign researchers work interpreted the rule to mean that only foreign researchers with specialist skills can be granted tax relief.

However, rules on the Taxation of Research Workers Board’s website state that researchers who have worked for one or two years as a postdoctoral fellow can qualify – although PhD students or recent PhD graduates are not eligible.

According to the magazine, HR at major Swedish universities like Lund only recently became aware that such early career researchers could qualify for the grant.

“Knowledge of who can receive expert tax relief varies according to the department, and centrally we are also not always sure which rules apply,” HR specialist at Lund, Julia Edgerton, told Universitetsläraren.

Despite the fact that a large number of foreign researchers who are potentially eligible for the tax break work at Lund, only 23 employees on average per year have been awarded the tax break in the past three years. Edgerton further told the magazine that this number could increase to at least a hundred per year, now that the university is better informed on the rules.

At Karolinska Institutet (KI), this number was even lower – in March 2024 only 16 employees were receiving expert tax relief, KI HR specialist Patrik Rosén told the magazine.

Another source of confusion is the legal requirement that the person applying for the tax break does not intend to stay in Sweden for longer than seven years, which led some universities to believe that employees with permanent positions could not apply.

In practice, however, intention to stay is assessed primarily on what the applicant states in their application, rather than the type of employment they have.

Ultimately, this confusion over who actually qualifies, as well as the short three-month application window from the start of employment, means that people who could have benefited from the tax cut do not find out that they qualify until after the deadline has passed. And with the Taxation of Research Workers Board refusing to accept late applications, these researchers are missing out on seven years of 25 percent tax cuts.

Is anything being done to stop this?

Yes. A government directive in June 2023 launched a review of the expert tax rules in order to see, among other things, if they have had the intended effect and whether any changes are required in order to “increase the rules’ international competitiveness and address any difficulties identified in the application of the law”.

Such changes could include potentially scrapping the rule that applicants must be considered experts in their field, and replacing it with a simple income-based rule, which would allow applicants earning over a certain amount (potentially varying depending on the industry) to automatically qualify. 

There is currently an income-based rule in place, allowing anyone earning over 114,691 kronor a month (2024 figures) to qualify, but as this is more than triple Sweden’s 34,200 kronor median salary, there are few researchers who qualify via this route.

The directive also includes potentially increasing the size of the tax cut, as well as extending the application deadline, removing the requirement that applicants may not be Swedish citizens (thereby opening it up to returning Swedish researchers who have spent a significant amount of time living abroad), and extending the time period in which applicants must not have lived in Sweden before applying, while potentially providing an exception for applicants who completed their doctoral studies in Sweden. 

The proposals from this review will be presented no later than January 15th, 2025.

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