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Sweden To Increase Banks' Tax Burden

by Ulrika Lomas,, Brussels

30 March 2016

The Swedish Government plans to increase the tax take from the country's banking sector by removing the tax deductibility of certain loans.

It was revealed in an article for Swedish daily Aftonbladet, co-signed by Finance Minister Magdalena Andersson and Left Party economic policy spokesperson Ulla Andersson, that the 2017 Budget will contain a measure to abolish the tax deduction on subordinated debt.

Subordinated debt is typically an unsecured loan that, in the event of the debtor's insolvency, is repaid only once the claims of secured creditors have been met.

The measure is intended to better align the tax treatment of debt and equity, although it will raise an estimated SEK1.4bn (USD170m) in tax revenue annually and unsurprisingly is being seen as an unjustified tax increase by the banking industry.

Responding to the report, the Swedish Bankers Association took issue with the article's insinuation that the sector is making "excessive profits" and said that not a single bank is featured among the top-20 most profitable companies on the Stockholm Stock Exchange.

"Despite this, banks are among the companies that pay the most taxes in Sweden," the Association's Chief Executive Hans Lindberg said in a statement.

Lindberg also warned that the proposed tax on subordinated loans would make it harder for banks to build adequate capital buffers and therefore the sector could be more vulnerable in times of financial crisis.

He also criticized the Government's decision to preempt the recommendations of a special commission on banking sector taxation, which isn't due to report until November 2016.

"We risk having an opaque patchwork of laws that have not been thought through in relation to capital adequacy rules and crisis management of banks," Lindberg said.

TAGS: Finance | tax | law | banking | Sweden

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