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Swedish Election Front Runners Release Tax Plans

by Ulrika Lomas,, Brussels

05 September 2014

The manifesto presented by Sweden's main center-left opposition party, the Social Democrats, which is leading in the polls for the election on September 14 against the ruling center-right Alliance coalition, focuses on employment and welfare reforms, funded by new and increased taxes.

The manifesto details policies for increased employment and unemployment benefits, education, family welfare, health and elderly care. It is expected to cost SEK40bn (USD5.7bn), compared with the SEK9.3bn to be spent by the Alliance (also on education and jobs), in the first year after the election.

To fund its promises, the only tax that the Social Democrats would cut would be that for pensioners, which would be reduced to the same rate as for workers on the first SEK12,000 of income each month. On the other hand, a new tax on banks would raise SEK4bn annually by 2018, and the full-rate value-added tax would be restored on restaurants.

In addition, personal income tax (PIT) would be hiked on those individuals with high incomes. Previously, it had been disclosed that a top-rate PIT rate (already currently around 57 percent) would be imposed on incomes over SEK60,000 per month.

On the other hand, in its manifesto, the Alliance has promised to more than offset its smaller election promises by raising taxes on alcohol and cigarettes, and on vehicles with high greenhouse gas emissions, and by cutting back tax breaks on pension savings.

The Government has also said that the level of taxation from the financial and the commercial property sectors, which are taxed less heavily than others, should be increased, but that, to safeguard the present fragile recovery in 2014-16, further budget consolidation should wait until 2017 and 2018.

The opposition has, however, dismissed that tax framework as "election tactics," and has insisted that, while there is no room for unfinanced reforms "in the short-term," a new center-left Government would reverse the present Government's previous tax-cutting direction, and increase overall tax revenue by one percent of Sweden's gross domestic product.

TAGS: individuals | tax | business | value added tax (VAT) | vehicle tax | public health | banking | budget | excise duty | social economy | education | unemployment | tax rates | Sweden | tax breaks | individual income tax

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