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COST OF LIVING

Increasing number of households in Sweden unable to pay bills

The number of debt collection cases in Sweden has increased during the ongoing cost of living crisis with more households at risk of being able to pay bills.

Published: 6 January 2023 16:13 CET
Increasing number of households in Sweden unable to pay bills
A higher number of unpaid bills were referred to Swedish debt collection agencies in late 2022, an organisation for the sector said. File photo: Jessica Gow/TT

Households that were on the margins of being able to make ends meet are increasingly likely to be unable to pay bills.

The situation is reflected by an increasing number of outstanding bills referred to debt collection agencies in late 2022, news wire TT writes.

“Unfortunately, this is the consequence of the very large increases in costs for households,” Fredrik Engström, lawyer and chairperson of industry organisation Svensk inkasso (Swedish Debt Collection) told TT.

“Those who were already on the margin before are now having a very difficult time and many have suffered with payment difficulties,” he said.

Electricity bills in winter months can be some of the most difficult to pay for households, and inflation and high gas prices in late 2022 have made the cost of heating and electricity higher than usual.

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Debt collection company Intrum now receives between 10 and 15 percent more debt collection cases for energy and electricity bills compared to a year earlier, TT writes.

Engström said that no dramatic increase in energy bill debts in particular had been seen during the autumn, however.

This may be due to those bills being prioritised over others, he added.

“You don’t want to risk the heat being turned off,” he said.

“There is a natural order of priority which households that have difficulty paying bills tend to follow. Rent, electricity and telephone bills usually come first,” he said.

Other late payments that might be referred to collection agencies can include both large and small loans as well as rolling costs like gym membership, broadband or other subscription fees.

Although Intrum has noted an increase in debt collection cases, Swedish consumers so far have shown a relatively good ability to withstand the cost of living crisis when it comes to paying bills according to Morten Trasti, chief analyst at Intrum Scandinavia.

This may be due to unemployment in Sweden remaining relatively low and many households having had the opportunity to save during the Covid-19 pandemic.

“If you compare the general case inflow today with how it looked during the same period before the pandemic, the number of debt collection cases has also decreased by approximately 7 percent” Trasti said.

The numbers are similar to those from March 2020 and the trend is comparable in Norway and Denmark, he added.

In September last year, Svensk inkasso asked its approximately 40 members if they had seen an increase in referrals in line with rising prices. Half of the companies said they had seen an increase of around 10 percent.

Engström said he would not be surprised to see a similar increase at the beginning of 2023.

“If the situation on the labour market gets worse, more Swedish households could have payment problems,” Trasti said.

“That is key for how the situation develops in future: how much unemployment rises,” he said.

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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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