Liberal Party’s tax proposal would increase VAT

In an opinion piece in Swedish daily, Dagens Nyheter on 9 November, the Swedish Liberal Party proposes a sweeping tax reform. In the party’s view, a new reform should centre on cutting tax on labour while raising VAT and environmental taxes. The proposal could be viewed as an attempt to test the waters and move away from bloc politics.

In its proposal, the Liberal Party outlines three main tax reductions.

• A reduction in marginal taxes on labour to the OECD average and abolition of the austerity tax.
• Reduced tax on low labour incomes.
• Reduced tax on business operations through a lower corporate tax rate. Sweden should, once again, be below the average in the EU and OECD. This is not the case today.

Any tax reform should be fully funded, according to the Liberal Party. The following increases are, therefore, proposed.

• Increased consumption taxes. The various VAT rates can be increased or, alternatively, VAT can be more standardised.
• Increased environmental taxes.
• A gradual decrease in the deductibility of interest payments.
• A raised ceiling for municipal property tax. The latter stages in combination with reduced property transaction taxes.

This is a brief overview of the main features of a broad tax reform.

Comment

Together with the Social Democratic Party, the Liberal Party was the main architect behind the major tax reform in 1990. At its economic-political seminar in Almedalen this summer, the Liberal Party raised the issue of the need for another major tax reform. At another seminar on the same theme, former Social Democratic Finance Minister Erik Åsbrink warmly endorsed a new reform. “If we could do it then, we can do it now”, was his conclusion.

In addition to responding to the need for tax reform that is seen to exist in many circles today, the proposal could be viewed as an attempt to move away from the last few years’ bloc politics by identifying yet another issue where broad cross-party agreement could be achieved.

As advisors to entrepreneur-led companies, it is obvious to PwC that owner-led companies took second place in the 1990 reform. Let us hope that the same mistake is not repeated. On the contrary, a new reform should perhaps take as its starting point the tax situation of the entrepreneur?