Finance Minister wants to review the tax system

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PwC-skatteradgivning-Meeting-solid_0002_burgundyMagdalena Andersson wants to have a review made of the tax system. She has never, previously, been well-defined in her argumentation. The Finance Minister’s clear interest and opinions can impact the tax issues which are now in the pipelines to be proposed.

Last week, the Central Bank’s Jubilee Fund and Skatteakademin (The Swedish Tax Academy) held a full-day seminar and discussion on the topic, “New Challenges for the Tax Investigation”. Invited to speak was, amongst others, Finance Minister, Magdalena Andersson, whose presentation was entitled “What does the Government want to accomplish with its tax policies?”

In this blog, I wish to share some of her comments and this can also provide an indication as to how she views some of the tax issues currently being investigated. The former Finance Minister, Erik Åsbrink, was also invited to the seminar, as was the Swedish Tax Agency’s Director-General, Ingemar Hansson. Their presentations are commented upon further down in this text.

Magdalena Andersson’s basic principles

  • General and more clearly defined regulations.
  • As few tax deferrals as possible.
  • More effective work against tax violations, both in Sweden and through international cooperation.
  • Fewer exemptions and tax credits.

25 years after the tax reform of the century. A lot has happened since 1990

  • EU membership
  • More cross-border operations. Increased internationalisation.
  • Increased risk of tax avoidance.
  • To some degree, new economic premises, such as, high inflation and high interest rates.
  • A number of reforms which are in conflict with the principles of the 1990 reform.
  • A greater number of knowledge-intensive companies and service companies.
  • Higher level of unemployment now. New demography and migration.
  • New political challenges.

The Finance Minister’s conclusion was that these new premises motivate a new review of the tax system. The tax system should be based on the same, basic principles but needs to be adapted to the changed premises.

The Finance Minister’s goal with the review

  • Strengthen the premises for growth and employment.
  • Smarter use of fiscal policy governing tools.
  • Secure long-term financing of the public sector.
  • Make it easier to comply with EU legal requirements.

Questions which, according to Magdalena Andersson ,should be addressed

  • How should the tax burden be divided between the various tax bases?
  • Which problems should/should not be solved via fiscal policy?
  • When is it motivated to deviate from uniform taxation?
  • How should we deal with new phenomena, for example, the sharing economy?

SACO’s Robert Boije provided comments and recommended a new tax reform with a reduced tax rate on income from labour.

Åsbrink: Introduce a flat tax model!

After Magdalena Andersson, the former Finance Minister, Erik Åsbrik, who had implemented the 1990 tax reform, made a presentation with the title, ”Capital taxation contra tax on labour--Time for a new tax reform !” Åsbrink showed no mercy in his criticism of today’s tax system and repeated his views, as aired at Almedalen earlier in the year, that a flat tax model should now be introduced. This implies a uniform tax rate of approximately 30 percent. The 3:12 rules are, according to Åsbrink, a ticking time bomb threatening the entire tax system and they have created new, unmotivated tax-favoured groups. His conclusion was that reform is not possible just now, but if we could do the impossible in 1990, then we should be able to do it again.

I will revert regarding this in a new blog after year-end in which I will provide a more detailed description of Erik Åsbrink’s flat tax model.

Swedish Tax Agency

The Swedish Tax Agency’s Director-General, Ingemar Hansson agreed with the criticism lodged against the 3:12 regulations and gave three examples of income conversion whereby income from services is converted from 60 to 20 percent tax rates. Hansson also participated in and implemented the 1990 tax reform.

  • Highly-paid employees with secondary income in their own companies.
  • Entrepreneurs with a large number of employees.
  • Part-owners owning at least four percent of a partner-owned company.

Hansson also mentioned that the total amount of dividends and capital gains which could be taxed at 20 percent due to the 3:12 regulations is currentlly at SEK 498 billion.

Comments

Already in 2006, Magdalena Andersson prepared a review of the tax system. At that time she couldn’t get anyone to join her in these efforts. After the possibilities arising in the autumn of 2015, she is now re-addressing this issue.

What is new is that no one with whom I spoke had previously heard her express herself so clearly regarding this issue and what she wanted to achieve. I spoke both with her speech writer and with Ingemar Hansson regarding this matter.

Magdalena Andersson’s clear interest and opinions can impact the tax issues currently being looked at and discussed in various contexts. In response to this, I have written this blog.

For closely-held companies, the content of Åsbrink’s and Hansson’s presentations is also interesting, even if no new aspects were brought to the fore. However, inevitably, the comments will reach the Ministry of Finance Committee studying the 3:12 rules, as well as reaching a large circle of policy-makers, interested stakeholders and knowledgeable tax experts.

It should be noted that the seminar was open to invited journalists.

Do you have any questions on entrepreneur and SME Taxes?

Hans Peter Larsson

Hans Peter Larsson

Hans Peter Larsson har tidigare arbetat på PwC med skattefrågor bland annat med inriktning på beskattning av ägarledda företag och deras ägare.
010-213 31 01
Hans Peter Larsson works at PwC’s office in Stockholm, focusing on tax issues such as taxation of owner-managed companies and their owners.
+46 10-213 31 01

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