Country Rankings - Sweden
Feb 15, 2017 Sweden: short memoriesI was somewhat encouraged to learn that Sweden's competition commission has sounded alarm bells over the proposed financial activities tax. For the country has something of a fatal attraction to such taxes. Citing a recent study by consultancy firm Copenhagen Economics, the Swedish Bankers' Association recently warned that companies would respond to the proposed tax by relocating operations to countries with lower wage costs, most likely the Baltic states, while smaller banks in Sweden would struggle to survive under the new tax regime. This could result in the loss of 16,000 jobs in Sweden's finance sector, of which 7,200 would be banking jobs, it said. Sweden doesn't have particularly fond memories of financial sectors taxes. Following the introduction of a short-lived financial transactions tax in the 1980s, trading in Swedish equities and other securities plummeted almost immediately. In fact, bond trading fell by 85 percent in the first week, and about 60 percent of the volume of Sweden's most actively traded shares shifted to London. Sure, the new proposal is a different type of tax. But whether Sweden likes it or not, even in a post-BEPS world, countries continue to compete fiercely with each other on tax. Companies are more mobile than ever. Bank-bashing tax proposals may be popular, but they can also be self-defeating.
May 09, 2016 Sweden: moves the goalpostsExtending the theme of tax uncertainty, a story caught my eye in the last week involving Fortum's ongoing tax dispute with the Swedish tax authority, SKAT, over a transfer pricing matter. Now, as most readers are no doubt aware, transfer pricing disputes are a dime-a-dozen these days, especially in the era of BEPS and Lux leaks. But this one stood out because Sweden, largely unnoticed, seems to have committed the cardinal sin of governments, at least in taxpayers' and investors' eyes, of taxing retrospectively. If I have read the situation correctly, the tax authority is seeking back taxes from transactions that took place in 2004/05 and 2008, but based on tax rules which were introduced in 2009. In which case, what chance has the company got of defending its position? Perhaps SKAT should be issuing taxpayers with crystal balls to help them predict future changes in taxation. What with Spotify's recent warning shot to the Swedish Government on tax and regulation, Denmark chewing the cud over a possible meat-based environmental tax, and Finland's smash-and-grab raid on its expat pensioners, it hasn't been a very good few weeks for Scandinavia. And especially for the latter of this Nordic trio, which gets another ticking off from me this week for being named the queen of the "nanny states."
Apr 04, 2016 Sweden: short memoriesThe trouble with governments is that they tend to have short memories. This is especially the case in your average democracy, where the lifespan of a government is usually no more than a few years. This can mean that sometimes they fail to learn from history. And one of the latest countries that looks like it could be about to repeat a fatal economic policy error is Sweden, which intends to increase the banking sector's tax burden in the next Budget. Now, I expect few people will have very much sympathy with the banks when they complain about being overtaxed, given that the industry has largely got away with financial and economic murder. But governments do have to be mindful that punishing the banks can have unintended consequences. Sweden's bankers are already warning that the proposal to abolish the interest deductibility of subordinated debt threatens to de-stabilize the country's banking sector. I can imagine many people countering, "well, they would say that wouldn't they." However, it isn't necessarily just the bank tax measure that earns Sweden a rebuke this week. Finance Minister Magdalena Andersson told Bloomberg that both the bank tax measure and a financial activity tax (FAT) can "absolutely" be introduced together. It's not clear entirely what the government means by a financial activity tax, but it's been suggested that it could be a tax on banks' revenues. However, given Sweden's history of financial taxes, perhaps it might not be one of the Social Democrat/Green coalition's brightest ideas. Born in 1967, Andersson was a mere teenager when Sweden's financial transactions tax was introduced in 1984. So she might not remember that trading in Swedish equities and other securities plummeted almost immediately after its introduction. Indeed, bond trading fell by 85 percent in the first week, and about 60 percent of the volume of Sweden's most actively traded shares decamped to London. The banking industry has already warned that the new FAT will cause an exodus of banks from Sweden, probably to London. Yes, they would say that wouldn't they. Nevertheless, global finance is no respecter of national boundaries, much more so now than in the 1980s. So perhaps Sweden should heed the warning. History can have a nasty habit of repeating itself.
Nov 13, 2014 Sweden: sensibleNot all courts are silly all of the time, of course, and the Swedish Supreme Administrative Court has dealt a welcome blow to the country's tax authority by refusing to change the treatment of "carried interest." The carried interest saga is running in a number of countries, most notably the United States, where the animosity of the left towards The Masters Of The Universe (investment bankers who get rich in the canyons of New York) has led the Democrats into a 20-year crusade against the capital gains status of their winnings. It's quite simple, at the end of the day: do you want to have a corporate finance industry or don't you? For the anti brigade, all they want is to punish the exponents of "the unacceptable face of capitalism" (that was Edward Heath, a pretend right-wing UK premier who was anything but), and nothing would make them happier than to see off the last banker from Kennedy. Sweden at least has learned from its past mistakes, one of them being the attempted introduction of a financial transactions tax, which nearly destroyed the country's stock market overnight. America's yuppies will be reassured this week after the mid-terms that they have at least another four years to play their games, and probably much longer.
Apr 18, 2013 Sweden: mistreat ChinaOne country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
Sep 27, 2012 Sweden: is SensibleSweden is implementing quite a large cut for 2013, from 26.3% to 22%, which is where the UK hopes to arrive by 2014. The financial crisis (it has been going on so long that crisis now seems to be our permanent condition) had put a stop to the copycat reductions which have seen the average level of corporate tax fall by more than 10 points in the last ten years. It's a stupid tax: not only is it quite easy to evade, as recent publicity for large US corporations has shown, but it has engendered a vast and wholly unproductive industry of tax advisers and consultants. I suppose I should be the last one to complain since I am part of it. Now that Japan has joined the game, it is really only the USA which remains outside, with 1980s style corporate tax rates above 40% in most states of the Union, and that's not because anyone wants the rate so high, it's just a consequence of the broken state of the Congress. By 2030 rates of corporate tax will be so low that abolishing it altogether will become feasible, and my shade will say: Good riddance!
Jul 12, 2012 Sweden: dares to be braveTax cuts have been few and far between lately, so full marks to Sweden for saying that it is going to cut the rate of corporation tax later this year. Currently the rate is 26.3%, down from 28% five years ago, so the country has lagged behind some of its EU competitors. The UK, for instance, which is in the middle of a program of phased cuts which will leave it with a rate of 23% next year. Traditionally Sweden has been a business-friendly country, hosting a lot of US corporations, and it surely doesn't want to seem out of line with its competitors. A 1% difference doesn't probably matter to most companies, but 3% is starting to be meaningful. And there is always Ireland with its 12.5% rate.