Committee’s proposal for a financial sector tax is scrapped

Last week the Swedish Government announced that it will not proceed with the current investigative committee’s proposal for a tax on the finance sector, but will continue to work with a proposal for a tax on banking services. The new investigation is to lead to a proposal for a pure bank tax uniform with EU law.

On 7 November 2016, the ”Committee on tax on the finance sector” presented its final report with a proposal aimed at reducing the tax advantages in the finance sector incurred due to the exemption of VAT on financial services. The Government’s ambition has been to ensure a larger contribution from the banking sector to public finances through a special tax of 15 percent on salary costs in companies selling VAT exempt financial services and insurance services.

The Swedish Government Offices have now concluded the preparatory process where, on the basis of a number of consultation replies, it has been shown that the proposal could have unintended consequences for, amongst others, mutual life insurance companies and the quickly growing financial technical sector. The political parties in the Government and The Left Party have, as a result, agreed not to continue with the proposal in the current circumstances.

At the Government’s press conference last week, it was seen that there is hope for such a proposal to be in place prior to the 2018 elections. The possibility of us seeing such a proposal by that time is deemed to be limited as such a proposal can, most likely, require a state aid investigation by the EU. At the same time, it can be noted that the Ministry of Finance will shortly distribute for consultation a proposal implying that the fees for resolution reserves be increased.

Comments

In spite of the Government choosing not to go further with the investigation’s proposal, the work in producing a proposal to reduce the banking sector’s so-called tax advantages will continue. Consequently, it can be concluded that some form of tax on the financial sector will, probably, be introduced at some point in the future.

Lennart Staberg and Ida Skog