Sweden Considers New Tax Hikes

by Ulrika Lomas, Tax-News.com, Brussels

07 February 2005

Despite the fact that taxes in Sweden already account for half of its GDP, new Finance Minister Pär Nuder has indicated that the government may reverse its recent tax cutting course and consider raising tax rates to fund the country’s extensive social security system.

In an interview with the Financial Times, Mr Nuder explained that the country’s increasingly wealthy electorate rejected the notion that higher taxes will damage national competitiveness, and were demanding higher investment in schools, hospitals and other public services.

"Contrary to many of my European colleagues I dare to say what is necessary. What people are demanding from us all over Europe is that we should invest more in the public sector," Nuder remarked.

"We are talking about a gradual raise in taxes. If you look around the corner, in five to 10 years we have to slowly increase the tax rates," he added.

Figures released by Eurostat, the European Union’s statistical office, last month show that Sweden's tax burden in 2003 was 51.4% of gross domestic product, the highest in the EU, and significantly above the EU average of 41.5%.

Nuder’s comments herald a possible shift in economic emphasis for the government after recent attempts to trim the tax burden, and have been met with incredulity by some in the country’s business community.

"It is unthinkable to increase the world's highest tax rates and be competitive in the global economy," Krister Andersson, tax spokesman for the Confederation of Swedish Enterprise stated, according to the FT.

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