Taxes for pensioners in Sweden were already lowered at the turn of the year, but the centre-left coalition government now wants to cut them even further for around a million of the country's retired workers.

The proposal costs around 4.3 billion kronor ($450 million), according to Social Democrat Finance Minister Magdalena Andersson, who has submitted the proposal to various authorities for consultation. If the feedback is positive, the tax cuts will be part of the autumn budget and come into force next year.

Around half of the 2.2 million people on a Swedish state pension pay higher taxes on their pension than the average employee does on their salary. This is due to a series of tax deductions for workers – called the earned income tax credit (jobbskatteavdrag) – pushed through by the previous centre-right coalition which governed Sweden in 2006-2014, and then by the right-wing opposition budget in 2018.

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“The pension is a deferred salary and should therefore be taxed as such, and in addition we do not think that those who have helped build this country should be penalty taxed,” Andersson told the TT newswire.

It is up to the budget negotiations between the government and the supporting parties to decide how to finance the tax cuts. Erasing the tax gap completely would cost another three billion kronor.

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