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Swedish Financial Activities Tax Proposed

by Ulrika Lomas, Tax-News.com, Brussels

11 November 2016


A special commission charged by the Swedish Government with reviewing the tax contribution of the financial services industry has proposed a 15 percent "financial activities tax" for companies in the sector.

Essentially a new payroll tax, the new levy will be based on the wages paid by banks and certain other financial institutions from January 1, 2018.

The financial activities tax is intended to increase the tax contribution of the industry, with financial services exempt from value-added tax under European Union law. According to the commission, the financial sector would pay an additional SEK19bn (USD2bn) in tax in 2018 if financial services were subject to VAT.

The commission has predicted that the new tax will raise SEK3.7-7bn in 2018, depending wage levels in the financial industry and the extent to which the tax is passed on to customers in the form of higher charges, although it expects the actual figure to be at the "upper end of this range."

Citing a recent study by consultancy firm Copenhagen Economics, the Swedish Bankers' Association recently warned that companies would respond to the tax by relocating operations to countries with lower wage costs, most likely the Baltic states, while smaller banks in Sweden would struggle to survive under the new tax regime. This could result in the loss of 16,000 jobs in Sweden's finance sector, of which 7,200 would be banking jobs, it said.

TAGS: tax | value added tax (VAT) | law | banking | financial services | payroll | Sweden | services | Europe

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