Increased value-added tax on certain repairs

Ida Ekeroth Clausson (S)

Madam Speaker! On Monday, the Riksdag hosted an inter-parliamentary conference on circular bioeconomy. During the conference, parliamentarians from primarily the national parliaments of the EU countries and the European Parliament met to discuss challenges and difficulties in the transition to a more circular bioeconomy.

One could get the impression at the conference that the government parties were interested in working more with a circular economy, but that does not seem to be the case. Instead, they choose to send signals to the contrary to an industry that is prepared to take responsibility for the necessary environmental and climate transition.

Today we are dealing with the Committee on Taxation's report SkU7 Increasing value-added tax on certain repairs. This is an issue that has been debated in the chamber before. At the end of January, I myself had an interpellation debate with the Minister for Finance on the issue, but her answer did not make me any wiser as to why the government is proposing an increase. Perhaps today we can get a clearer statement from the parties that stand behind the proposal.

Bare almost a year ago, in May 2022, a unanimous Riksdag decided to lower the value-added tax on certain repairs of, among other things, bicycles, shoes, and clothes. This was done to encourage more consumers to repair and modify already manufactured goods instead of buying new. The reduction was considered to be able to contribute to a more sustainable use of products and lead to steps being taken towards a more circular economy.

So, the Riksdag was agreed that this was the right way to go, but since then something has happened.

A few months later – in the autumn – one of the first proposals that the government presented instead was to raise the value-added tax for certain repairs. This meant that a total reversal had occurred in just a few months. This becomes even more remarkable when one thinks of the election campaign, where the Moderaterna promised not to raise any taxes during the mandate period we are now in. But once again, the Tidö parties said one thing before the election and another thing after the election. The broken promises are starting to become many now.

Under the heading Effects for the environment, the government itself raises the following in the bill: "Repairing an item instead of buying a new one means in many cases that a smaller amount of raw materials and less energy need to be utilized, that the emissions of environmentally harmful substances are lower and that the amount of waste decreases." It is therefore quite clear that the government shares the view that poorer incentives for consumers to repair and fix damaged products is worse for the environment, yet one still chooses to proceed with a proposal for increased VAT.

Madam Speaker! According to a 2023 forecast from the European Commission, Sweden ends up at the bottom of the list for economic growth. That is, the Swedish economy is performing worst in Europe. The economy is expected to shrink by 0.8 percent during 2023, and Sweden thus appears set to become the EU's only member state with negative growth. We have known from before that a recession awaits and that people risk becoming unemployed, which the European Commission also addresses in its report.

There is no doubt, therefore, that Sweden is in a difficult economic situation, and that the government parties in this situation want to strengthen the state treasury is perhaps not much to say. According to the government's own calculations, the increased value-added tax on certain repairs means that the state treasury is strengthened by up to 60 million kronor this year. It is, of course, not small change, but in relation to the entire budget, the sum is almost vanishingly small, especially when one considers that the tax has been lowered for us high-income earners and that the state is therefore expected to lose revenues of 13 billion kronor this year. It is, therefore, over 200 times more than the increase in revenue expected to come from the increase in value-added tax on certain repairs.

In my interpellation debate with the Minister for Finance, I received the answer that one purpose of the increase was to finance the defense. In that case, it is worth noting that the revenue increase in this instance would not be enough to cover more than one-hundredth of a submarine.

Perhaps more tax increases and VAT adjustments are to be expected. According to the bill, the government's starting point is that the value-added tax shall be uniform and that the standard tax rate of 25 percent shall be applied. This can, of course, be interpreted as that more VAT increases are to be expected, but for the time being, it is only the current value-added tax on certain repairs that is proposed to be increased.

It is truly a remarkable prioritization from the government. The only tax increase proposed yields relatively small revenues while, according to both the government itself and several referral bodies, it will lead to poorer resource management and that the environmental impact from new production will increase. For me, it is a clear signal of how highly, or rather lowly, the government and the governing parties prioritize the environment. It becomes even more remarkable in light of the fact that the Riksdag, less than a year ago, as stated, was in agreement to lower the said VAT to 6 percent.

Madam Speaker! I want to ask the representatives for the parliamentary majority how they view the small business owners who now risk having smaller margins when more people choose to buy new goods instead of repairing old ones. Higher taxes on repairs risk hitting the number of jobs just as we enter a recession. There are also fears about the loss of competence, which rather needs to be increased if we are to achieve trade with better sustainability.

The Moderates and other parties in the government and the government base usually say that they stand up for small business owners. Is that what they are doing now?

It is of course possible to argue that the price of an individual bicycle repair or the mending of a shoe is not affected so much by the proposed VAT increase. The fact remains, however: Many small business owners experienced an increased influx of customers when the VAT was lowered last year, and they now feel well-founded concern for an opposite effect.

I and we Social Democrats are still concerned about how the majority parties choose to prioritize the environment, and we think it is regrettable that the proposed VAT increase comes in this economic situation. With reference to the Social Democrats' budget motion for 2023, we believe that the reduced value-added tax on repairs should remain, but in order to safeguard an orderly and cohesive budget process, we refrain from participating in the decision. We have set out our position in a separate statement.

(Applause)

The speech at riksdagen.se, in Swedish (opens in a new tab)

Andrea Andersson Tay (V)

Madam Speaker! Vänsterpartiet shares the government's view that increased uniformity in the tax system is desirable. The development of the Swedish tax system over the last 20 years has involved significant departures from this principle. Jobbskatteavdrag, rut and rot have been introduced, and a uniform capital taxation of 30 percent is but a memory. There are also a number of different reductions in employer contributions for different groups and ages.

In our budget motion for 2023, we in Vänsterpartiet presented a number of proposals for tax changes aimed at achieving a more uniform tax system. We submitted proposals that would have reinstated the principle of equal tax on equal income regarding income taxes, and we took significant steps towards a more uniform capital taxation. However, there may be areas where deviations from the principle of uniform taxes can be justified. The climate and environmental area is one such area.

This year, the government is to present, according to the Climate Act, an action plan for how Sweden shall reach the climate goals during the mandate period. A large number of agencies have contributed with background material and proposals for this. But even if all these proposals are implemented, it will not be enough to fill the gap that has arisen due to the government's policy, the Climate Policy Council has recently stated. The political changes that the government has presented so far lead instead, which the government itself admits, to an increase in greenhouse gas emissions. The proposal in the bill to increase the value-added tax on certain repairs should be considered in this context.

In order to reduce society's climate and environmental impact, the consumption of natural resources must decrease. To achieve this, we need policy instruments for a circular economy that increase the lifespan of products and strengthen the possibility to repair and reuse. Even though a reduced VAT rate on certain repairs is a limited measure, it is valuable in a situation where our climate measures, small as well as large, must be intensified. It appears from the bill that the government itself assesses that an increase in VAT will lead to increased demand for newly produced goods and worse conditions for small businesses in the industry.

Vänsterpartiet shares the Swedish Environmental Protection Agency's assessment that high availability of repair opportunities is necessary to make it easy for the public to utilize repairs. According to the Swedish Environmental Protection Agency, the government's and the Sverigedemokraternas proposals send the wrong signals to the public, the business sector, and entrepreneurs in the affected industries. The transition to a sustainable society requires long-term management tools. Vänsterpartiet therefore says, in line with several of the referral bodies, no to raising the value-added tax on certain repairs.

I move for approval of reservation 1.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Per Söderlund (SD)

Madam Speaker! I vote in favor of the committee's proposal for a decision.

Proposition 2022/23:35 Increased value-added tax on certain repairs: The Government proposes that the value-added tax for repairs of bicycles, shoes, leather goods, clothes, and household linen be increased from 6 percent to 12 percent. The proposal aims to increase uniformity in the value-added tax system.

Madam Speaker! Tax rates in the value added tax area are regulated by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, the so-called VAT Directive. According to that directive, the Member States shall apply a standard rate of at least 15 per cent. In addition, the Member States may apply a maximum of two reduced tax rates which may not be less than 5 per cent.

In simplified terms, it can be said that the reduced tax rates may only be applied to the goods and services specified in the annexes to the VAT Directive. Only those services covered by this bill are included in these annexes.

Madam Speaker! Value-added tax is an effective tax and should be protected as a source of revenue for the state. Fundamentally, value-added tax is a fiscal tax, and the use of value-added tax as a steering tool goes against the principle of the tax's primary purpose. The starting point should therefore be a uniform value-added tax and the application of the standard tax rate, 25 percent.

The difference in tax collection will now be smaller between the services in question and other goods and services covered by the standard tax rate. The Swedish Agency for Public Management considers that competition neutrality is thus improved between different industries. It is also considered that differentiated value-added tax rates lead to impaired competition neutrality between industries.

This industry is, however, small in relation to the economy as a whole, and many of the affected companies are small. Therefore, the public finance effects also become small, in the order of 80 million kronor per year.

Madam Speaker! The service of replacing a bicycle tire upon puncture, which today costs around 300 kronor, will after the value-added tax increase cost around 315 kronor including value-added tax. The service of a complete renovation of the sole of a shoe and replacement of the sole, which today costs around 1,400 kronor, will after the value-added tax increase cost around 1,480 kronor including value-added tax, which is more than what many normally pay for completely new shoes.

I do not believe that 15 kronor is decisive for whether someone will leave in their bicycle to repair a puncture. I also do not believe that 80 kr is decisive for whether someone who has paid more than 1,400 kronor for a pair of shoes will have them resoled or buy new ones.

The steering that the value-added tax entails in this case is therefore marginal.

Sveriges Skomakarmästarförbund with several assessors however judge that the proposal will lead to a somewhat worsened resource management and that the environmental impact from the production of new goods will increase.

The effect is however judged to be small. I would say that it is very small.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Janine Alm Ericson (MP)

Madam Speaker! The Government and the Sweden Democrats have proposed in the 2023 state budget that the VAT on repairs of certain goods shall be doubled from 6 percent to 12 percent starting from April 1.

I and Miljöpartiet do not understand the purpose of the proposal, and it is going completely in the wrong direction in every way. We know that we need to move away from a throw-away society, not dig ourselves deeper into an economy that in the long run is not good for the residents' or the companies' wallets and really not for the environment. It must, on the contrary, become more favorable to repair and fix what one already has.

During its time in government, Miljöpartiet lowered the VAT on repairs of bicycles, shoes, leather goods, clothing, and household linen from 25 percent to 12 percent. Since then, it has been lowered further. This was done to make it easier and cheaper for consumers to repair what they already have and to support an industry with small margins. Repairing one's bicycle, adjusting one of one's old favorite garments, or fixing up one's dress shoes also consumes far fewer natural resources than buying new.

Those who are interested in creating a more sustainable economy should want to facilitate the use of repair services. In itself, neither climate policy nor sustainability is the government's specialty, but it is sad to see how their reluctance to transition affects both companies and consumers.

Madam Speaker! In the survey that Sifo recently conducted for Hantverkarna Stockholm, 89 percent of Stockholmers say that they to a large extent or quite a high extent think that it is important for the climate and the environment to repair and recycle. In the same survey, 41 percent say that price is an important factor for repairs and 37 percent say that availability is important.

A higher VAT leads to a higher price and thus creates difficulties for the repair companies. Fewer companies also result in poorer availability.

Politics should encourage and take advantage of this. It is a knowledge to make decisions on. But the government is doing exactly the opposite instead.

Craftspeople, tailors, bicycle repairers and shoemakers play an important role in the transition to a more sustainable and circular economy. The companies affected are also often small companies with no or few employees. Many have budgeted their operations based on the current VAT rate. That the government, in this very tough economic situation, chooses to make things more difficult for this type of company is completely incomprehensible.

We in this chamber should promote a more circular economy and more repairs, not oppose it. Instead of going after Sweden's craftspeople and consumers who want to make climate-smart choices, the government should support the small business owners and consumers who contribute to a more circular and sustainable economy.

Since that is not the case, I move for the reservation from MP and V to be granted and for the committee's proposal to be rejected.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Marie Nicholson (M)

Madam Speaker! It is my premiere here today, and I would hardly have thought that in my very first debate in the chamber I would be standing in the rostrum to defend a tax increase. But the increase of the VAT on certain repairs that we are discussing today is well in line with the government's priorities, and as any good Moderate sees the whole of the tax system.

There are several purposes behind the increase of the VAT on certain repairs from 6 to 12 percent, including achieving greater uniformity in the value-added tax system and reducing the difference in the cost of repairs for bicycles, shoes, clothes, leather goods and household linen compared to the cost of repairs of other goods.

VAT is a treasure that the consumer unfortunately rarely notices, as it is embedded in the price. But it can, at the very least, be perceived as confusing that one is to pay 25 percent VAT for the repair of one's wristwatch but 6 percent for the repair of the leather strap that holds the watch in place. It can even be perceived as unfair.

The exemptions from 25 percent VAT that we have in Sweden are often wise and heart-felt. Value-added tax should, however, primarily be seen as a fiscal tax, i.e., as a source of income to finance our common costs, and not as a steering tool.

In the long run, it could be wise to discuss abolishing all exemptions and instead have a lower standard tax rate. This would mean less administration for both companies and the state, and we would also not need to spend time and effort discussing what should be lowered or raised. Unfortunately, we are not yet in a position where this can be done.

Let us instead evaluate how well the reduced VAT in this case has functioned as a steering measure. When the VAT on certain repairs was reduced for the first time in 2017, it was from 25 to 12 percent, which is a significantly larger change than the one proposed today. The effect was, however, very limited.

At the International Institute for Environmental Studies in Lund, they have studied why the effect did not materialize and concluded that, on the one hand, few consumers knew that the VAT had been lowered, and on the other hand, it was rarely noticed in the final price as many of the small business owners who carried out the repairs chose to strengthen their, often very small, margins instead of lowering the price for the customer.

The institute has also established that the price of the repair is not decisive, but rather the cost of the product. In short – the more money you spend on an item, the more likely it is that you choose to repair it.

I have at some point discussed the future with my own shoemaker, and he told me that the biggest problem is not the lack of customers, but that the shoes they come with are manufactured in synthetic materials or in far too low quality for a repair to be possible.

To stimulate a circular economy, VAT appears to be an insufficient tool. Instead, we should work to ensure that small business owners get better conditions, less red tape, and better profitability in their operations. We should work to strengthen household finances so that it is possible to make wise choices in their purchases. One can hardly blame people for choosing cheap shoes when the electricity bill has just arrived. The person who, on the other hand, gets to keep a larger portion of their income finds it easier to make conscious choices.

Madam Speaker! An increase can sometimes, in the long run, mean a decrease, but above all, I move for the approval of the government's proposition today so that we, as a country, shall make wise priorities. We shall pursue a conscious policy, and we shall invest where it makes a difference.

(Applause)

The speech at riksdagen.se, in Swedish (opens in a new tab)

Janine Alm Ericson (MP)

Madam Speaker! At this point, it is no news that the government is doing its best to sabotage all climate and environmental work worth mentioning. In the name of honesty, the actions regarding the circular economy are hardly surprising. What is surprising, however, is that the government is also actively making it harder for small businesses, which are already fighting for their survival today.

The consequence of the increased VAT for repairs is - despite the government side and the Sweden Democrats having tried to downplay the effects - that it becomes more expensive to repair shoes and clothes. Even the Moderates must understand that it has consequences for the small businesses and sole proprietorships that already today have difficulty making ends meet.

Raising the VAT on repairs is not only actively opposing the green transition, it is also to pursue anti-business policy. Why do the Moderaterna want to make it harder for small craft businesses to survive?

The speech at riksdagen.se, in Swedish (opens in a new tab)

Marie Nicholson (M)

Madam Speaker! I share Janine Alm Ericson's concern for small business owners and want to facilitate things for all small business owners in Sweden, not just within certain industries. But why should the specific small businesses we are discussing today have 6 percent VAT while repairs of, for example, furniture and watches have 25 percent? Why should there not be a lower rate for all?

As we have discussed, VAT is not a tax that should be used as a steering tool but primarily as a fiscal tax. Therefore, one should rather strive to have a lower base tax rate so that all business owners, regardless of whether they are large or small, find it easier to reach consumers.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Janine Alm Ericson (MP)

Madam Speaker! Now we are talking about precisely this rent increase and precisely these companies that are affected. It becomes a matter of mixing up the cards if one talks about it more broadly – we will return to that many times.

Miljöpartiet also thinks that it is a rather rigid regulatory framework regarding the VAT. We also think that more companies could have been included in the reduction, and that one could have played with the VAT rates there as well. But the EU's regulatory framework is very rigid. When you, for example, want to have your windows renovated, you cannot let a craftsman take them with them; the work must be done on-site. We can jointly look at trying to change the regulatory frameworks, even though it is difficult.

When it comes to not using the VAT as a tool for transition, it is a completely crazy attitude. The researchers and all available science say that one must do everything to reverse the trend regarding both the climate and the depletion of biodiversity. To say that one has a tool at hand that one does not intend to use appears, to say the least, tone-deaf. Against the background that one is also making it harder to meet the environmental and climate goals and for small business owners to get by, I want to ask again why the Moderaterna want to go this way. Why do they want to make it harder for small craft businesses to survive, and why do they not want to use all the means they can for transition?

The speech at riksdagen.se, in Swedish (opens in a new tab)

Marie Nicholson (M)

Madam Speaker! One might ask if one should use the VAT as a steering tool when it makes no difference. As I said in my speech, studies have been conducted which show that it did not have any concrete effect. Is it just symbolic politics or does it make a real difference? I think that if one is to talk about the climate and a circular economy, one should make the efforts that actually matter. That means strengthening the economy of individuals and households and also making it easier for small business owners, regardless of which small business owners it is and regardless of which repairs they carry out.

A reduction of the VAT generally would benefit everyone, but above all the households' economy. I am very proud that our government is moving away from implementing policies solely for the sake of symbolism. I can mention the bag tax, which I believe people are just annoyed by. Miljöpartiet knows the effects but holds fast to implementing a policy that is only about symbolism.

(JANINE ALM ERICSON (MP): But the plastic bag tax remains.)

The speech at riksdagen.se, in Swedish (opens in a new tab)

TREDJE VICE TALMANNEN

One must not interrupt another member's speaking time. It was not okay.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Helena Lindahl (C)

Madam Speaker! My grandfather was a shoemaker. He lived in communist Poland and was a very proud self-employed businessman. At that time, many went to the shoemaker to repair their shoes, and it was probably mostly for economic reasons. One perhaps only owned the shoes one had on one's feet and possibly also a pair of fine shoes. Shoes were very expensive.

Today, people are expected to repair their shoes and bicycles, simply so that they will last longer. But unfortunately, it has become very much of a throw-away society where one buys very cheaply, perhaps synthetic, and then throws it in the trash. People don't have the energy to arrange to get things repaired. That was one of the reasons why the Riksdag last year chose to lower the VAT from 12 to 6 percent. The Center Party thought that it was worthwhile.

Now there is a proposal, which will probably pass, that there should be an increase to 12 percent again. We have deliberated on this in the Center Party and taken into account the situation that prevails today. People are drowning in major wallet issues, not least when it comes to electricity and energy. Therefore, we have chosen to place the focus in our shadow budget on broadening the green deduction, which can really make a difference for people. One should not imagine that electricity bills will be lower next winter; instead, they will continue to be high.

People also need to be able to afford to energy-efficient, but not everyone has that money today. With the green deduction, one might get the opportunity to buy a heat pump or possibly install solar cells. Centerpartiet believes that it is the most effective thing to do, both environmentally and from a wallet perspective, right now. But in order to safeguard an orderly and cohesive budget process, we also refrain from participating in the decision.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Cecilia Engström (KD)

Increased value-added tax on certain repairs

Madam Speaker! Value-added tax is an effective tax and should be protected as a source of revenue for the state. For us Christian Democrats, the starting point is that a uniform value-added tax simplifies the work with VAT for both companies and individuals.

To create greater uniformity in the value-added tax system, we believe that the value-added tax for repairs of bicycles, shoes, leather goods, clothing, and household linen should be raised from 6 to 12 percent. By raising the value-added tax, these services are treated more similarly to services that are taxed at the standard rate of 25 percent.

Madam Speaker! When it comes to the question of whether the proposal steers away from a more circular economy, the effect is small. The price difference between 6 and 12 percent VAT is usually not decisive for whether a good should be repaired or not. The difference in tax collection becomes smaller between these repair services and the repair services covered by the standard tax rate of 25 percent. Competition neutrality is also improved between different industries. The proposal does not lead to fewer jobs either, as reduced demand for repair services should lead to increased demand for newly produced goods. By still maintaining a reduction to 12 percent, one nevertheless favors the circular economy; it becomes more advantageous to repair goods than to buy new.

Madam Speaker! What the members of the committee state does not change the assessment that the value-added tax should be increased in accordance with the proposal. Therefore, I move for the proposal to be approved and for the motions to be rejected.

The deliberation was hereby concluded.

(Decisions were made under § 21.)

The speech at riksdagen.se, in Swedish (opens in a new tab)