The governing Alliance parties—Moderaterna, Folkpartiet (Liberal), Centre, and Christian Democratic parties have taken an important first step. Their centre-right coalition manifest includes new promises regarding tax issues, and more significantly, they emphasized the importance of Sweden providing an internationally competitive business climate.
In a world that is changing ever faster, we cannot simply cling to old policies that may have worked before. The more flexible and dynamic our economy can be, the better Sweden can thrive in a continuously changing world.
Sweden has seen several important tax reforms enacted in recent years. The previous and current governments have in turn passed legislation to eliminate inheritance, gift and wealth taxes that together have improved prerequisites for ownership transfers of companies. If these changes gain full acceptance, their effects will be amplified and thus improve capital flows and investment. The tax on work has also been lowered through job tax deduction and lower payroll taxes.
But Sweden still has the world’s highest tax burden. Furthermore, many current taxes function poorly. Sweden is therefore in urgent need of a general revamp of its tax system. The country still needs a tax system that rewards gainful employment and lets people gain from higher pay, and from entrepreneurial activity and investment. With competition steadily increasing around the world, more local businesses and industries see the obvious dampening effects that many Swedish taxes have on profitability, or on restricting growth.
Many possible tax reforms have gone through legislative preparations and are ready for enactment. The most pressing are reduced tax on capital and the high marginal taxes in the country. These measures are widely supported in both the business and research sectors as likely to bring significant positive effects on financial efficiency and growth. And these measure are simple to implement.
However, since tax issues are so broad, there are many that require significant basic legislative preparation and research to identify sustainable improvements. Issues include company taxation, rule of law, many VAT areas, and close company taxes. It is important to strengthen the private sector and increase the availability of Swedish venture capital. Moreover, many older rules need to be cleared away, or simplified, and interpretation issues need answering.
The modern world with global competition demands a robust tax base. We think Swedish governing politicians must act more proactively, rather than simply react to adapt the tax system to changes outside the country—that an offensive strategy is preferable. The Confederation hopes that the latest political promises in this field will bring us closer to these goals—it’s high time to act decisively on tax issues.
