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Sweden To Axe Wealth Tax

by Amanda Banks,, London

03 April 2007

The Swedish government has signaled its intent to increase Sweden's attractiveness as a place in which to invest by pledging to scrap the wealth tax in the upcoming budget, due to be announced on April 16.

The centre-right four-party coalition made the pledge in an announcement published in a newspaper, arguing that Sweden remains only one of four countries in the OECD that levies a wealth tax. The government has also blamed the tax for contributing to high levels of capital flight and low levels of investment and entrepreneurship.

"The big winners are, in the long term, all Swedes, because we need to have the conditions for jobs and companies necessary to match global competition," Finance Minister Anders Borg was quoted as saying by AFX News.

"One issue is that little money stays in the country. There has been a big discussion in recent years about how globalization makes capital more and more non-national and harder to keep within national boundaries," he went on to observe.

Currently, Sweden's wealth tax is charged at 1.5% on savings of over SKR1.5 million (US$214,000) for single people, and at the same rate on savings of more than SKR3 million for couples. In 2005, the tax raised around SKR4.5 billion in revenues from a mere 2.5% of all taxpayers, and it is argued by proponents of axing the wealth tax that the move would have a negligible impact on the public budget. Revenues lost to the government are to be partly financed through cutting tax breaks on private pension savings.

The announcement is the first indication that Prime Minister Fredrik Reinfeldt is serious about tackling the size of Sweden's welfare state and tax burden, both of which are among the world's highest. Prior to his election victory last September, Reinfeldt's coalition talked about cutting income, corporate and property taxes by about SKR60 billion. These cuts would be financed in part by paring down unemployment and sickness benefits. The coalition has also expressed its intention to make the labour force more flexible by allowing companies to hire and fire workers more easily, and by removing certain state benefits which it argues act as a disincentive to work.

The election of Reinfeldt as Prime Minister ended the 12-year reign of former leader Goran Persson, but more significantly, it heralded the first interruption of the centre-left's seven-decade domination of Swedish government.

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