New 3:12 – Uncertain right to the end!

If the Government includes its proposal for new 3:12 regulations in the autumn budget, will the coalition parties, with the support of the Sweden Democrats, stop the proposal? This was the question addressed by the hearing organised by the Swedish Federation of Business Owners with economic-political representatives from the opposition parties (former coalition government).

In the proposal the Government has chosen not to proceed with any of the more far-reaching negative measures in the roles as presented in the report from the 3:12 Committee of Inquiry. Uncertainty regarding the newly adjusted proposal for changed 3:12 regulations, which has been sent out for consultation by the Government concerns, the following two points:

The first question is if the Government will take to heart, to a greater degree, the criticism expressed regarding the proposals and if it will present, in the autumn budget, a new, modified proposal or, perhaps, put the entire proposal on hold for the time being. The Ministry of Finance has made no comment on this matter.

The question which the Swedish Federation of Business Owners posed to Ulf Kristersson, Moderate Party, Emil Källström, the Centre Party, Said Abdu, The Liberals and Larry Söder, The Christian Democrats was: Will you stop a proposal for more restrictive 3:12 rules if such a proposal is included in the autumn budget? Ulf Kristersson replied that the Moderate Party is against a proposal implementing less advantageous rules but that they, still, have the same view as the previous Minister of Finance, Anders Borg, that is, that the rules as they are can, in certain respects, be abused. The other political party representatives agreed with this statement. Emil Källström clarified the situation by noting that it is ”clear as glass” that the tax burden should not be increased, but rather reduced. All of the representatives believed that that portion of the proposal dealing with generational shifts should be implemented.

And if the proposal is put into effect? Everyone wants to tear it up!

”Why not just stop it right away?”, was the next question.

Here the spokesmen referred to the existence of ”varying means of handling a poor budget”, as they put it. Kristersson stated that it is ”probable that the Government understands that they should not put the proposal forward as a bill as it will be stopped in some manner”. Källström stated, ”I imagine that the Government can take the hint that they shouldn’t go forward with the proposal”. If the Government chooses to put forward the proposal on more restrictive 3:12 regulations, the Moderate Party and Christian Democrats want to see an alternative budget from the opposition parties. The Centre Party wants to eliminate certain proposed changes in regulations through an initiative in the Finance Committee and the Liberals want to make a motion of no confidence as regards the Minister of Finance. This latter measure risks resulting in Magdalena Andersson stepping down and new elections. ”There is no question of a new election”, was the response of the Christian Democrats.

Finally, the question was posed as to whether the representatives, if they had their own limited liability companies, would actually choose to distribute a larger dividend during the spring? Here, however, none of the spokesmen offered a response.

The Sweden Democrats were not represented on the panel. Their economic-political spokesman has, however, recently stated in a newspaper article that the party does not wish to see any restrictive changes in the so-called entrepreneur tax.

Comments

Facing the spring’s shareholder meetings, there is reason to maintain the view that the only thing that is certain is that tax on dividends will, at any rate, not be lower. Where this issue will finally land is uncertain even if the views within the opposition parties are clear.

The alternatives, in general, are:

• The Government can include the current proposal in the autumn budget.
• The Government can consider, to a greater degree, the criticism from the consultative bodies and opposition parties and modify the proposal to be presented in the autumn budget.
• The Government can choose to wait for the time being and make no presentation of a proposal.
• Should the Government choose any of the first two points, this will be challenged by the opposition parties and possibly stopped.
• Should the Government choose the second alternative, the opposition parties can let the proposal go forward and this would provide them with an election issue and the possibility to subsequently restore the regulations after a change in government.

A number of alternatives can exist. The autumn budget is to be presented on 20 September.

My own guess is, still, that the autumn budget will contain a proposal for, at any rate, an increase in the tax rate. It is also likely that it will also include the positive change as regards generational shifts.

It’s worth remembering that dividends can, under certain premises, also be determined through an extra meeting of shareholders in a limited liability company.