Leading economists and business representatives have expressed concern over the country’s future economic prospects following suggestions from the government that taxes will have to rise in order to fund the country’s public services and social security system.
In a recent interview with the Financial Times, Sweden’s Finance Minister Pär Nuder revealed that higher taxes would not only be necessary to maintain the country’s welfare state, but also had the broad support of the voting public.
“What people are demanding from us all over Europe is that we should invest more in the public sector. 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," Nuder stated.
However, his comments do not appear to have won the support of the country’s business leaders and economists, who fear that additional taxes will distort investment decisions and act as a drag on economic growth.
"We are deeply concerned when the government (calls) for even higher taxes. Production and jobs are leaving Sweden at far too high a rate, even if globalisation also entails large benefits to Swedish society," warned Ebba Lindso, director-general of the Swedish Confederation of Enterprise, according to the FT.
Ingemar Hansson, head of the National Institute for Economic Research, a government agency, concurred with this view, forecasting that "people will work less" if taxes are increased, while Jan Häggström, chief economist at Svenska Handelsbanken, branded Nuder’s idea of raising taxes, which at 51.4% of GDP are already the highest in the OECD, as "absurd".
Income taxes have been identified as a likely target for an increase, although Sweden’s Prime Minister Goran Persson stated at a news conference last week that raising VAT, currently at a top rate of 25% and a lower rate of 6%, was a “good way to get money in”.
Persson also indicated that local taxes could rise.
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