Swedish PM Offers Income Tax Cuts To Boost Economy

by Ulrika Lomas, Tax-News.com, Brussels

31 August 2009

Prior to his summer speech, Swedish prime minister, Fredrik Reinfeld, has announced his Moderate Party proposal to cut income taxes to the tune of SEK10bn (USD1.4bn), equivalent of an extra SEK200-250 for every working person. This fourth cut in income tax since the Moderate led Alliance coalition came to power in 2006 is expected to create jobs - 3,000 in the short run and 10,000 longer term.

This came a day after the finance minister, Anders Borg, advised a press conference in Harpsund of a 'clear improvement in the public finances' and more optimistic estimates of future growth. Borg was non-committal about tax cuts in his Autumn budget. According to the finance minister, tax revenue was about SKR10bn higher than expected, and expenditure lower, such that the government has SEK25-35bn (USD3.5-4.2bn) more at its disposal than expected. The finance minister's revised figures show Sweden's public deficit for 2009 will be 2.4% of GDP and will reach 3.7% in 2010. The parties in the centre-right Alliance government have still to negotiate whether Moderate Party proposals can be included in the Autumn budget.

While growth has been revised upwards by Borg to 0.6% in 2010, he also forecast that unemployment would keep rising to peak at 11.6% in 2011.

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