Value Added Tax
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
S considers that value-added tax is an important foundation for welfare and should be uniform with few exceptions 1. SD wants to see a review for increased harmonization as the current system creates complications 2 and wants to investigate the conditions for harmonizing the VAT for tourist attractions and cultural areas 2. M considers that VAT is an effective fiscal tax but a poor political steering tool 3 and wants to focus instead on lowering the tax on labor 3. C wants the VAT to be reviewed in a broader tax reform to create an easy-to-understand system 4. KD argues that the VAT system is complicated 5 and wants to investigate the rental VAT system to facilitate leasing 5. MP considers that increased VAT on repairs counteracts sustainability 6 and wants to exempt sun protection from VAT 6. MP argues that a VAT reduction is an effective way to achieve the desired effect 7. L wants a uniform and simple tax system that reduces the administrative burden for companies 8.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Ida Ekeroth Clausson (S)
Mr. Speaker! Today we are dealing with the Committee on Taxation's report SkU15 Value Added Tax. Tomorrow we will also debate VAT here in the chamber, but then regarding report SkU10 New Value Added Tax Act.
For the Swedish welfare state to function, a functioning and reliable tax system is needed. The difference between the social democratic view of freedom and the liberal one is that we are not satisfied with everyone having the same rights and opportunities in theory. We also want the actual outcome to be equal. By having the tax system finance our common welfare, resources are redistributed so that the opportunities for education and a good life become more equally distributed in society.
It is largely taxes that fund healthcare, childcare, elderly care, roads, public transport and so on. In times like these, when municipalities and regions are heading into the worst economic crisis of this century, a robust tax system provides good conditions for the state to actually be able to step in and provide significant relief for the welfare system.
A well-functioning tax system is not enough, however, to provide the welfare state with sufficient conditions. Difficult economic times also require a decisive political leadership, and it is lacking today when the government has no plan to build Sweden stronger.
The main task of the tax system is therefore to ensure tax revenues that can finance the welfare. In addition to this, the tax system shall contribute to redistribution, equality, and equity. For it to be fair and have trust among the citizens, it is important to have general rules with broad tax bases and, not least, a level of taxes that is well-balanced against the goals of the economic policy and the ambition for the welfare. Clear rules contribute not only to understanding and legitimacy for the tax system but also reduce the administrative burden for companies and private individuals. Furthermore, the risk of errors, negligence, and deliberate fraud is also reduced if the system is easy to understand.
Mr. Speaker! The value-added tax was introduced in Sweden on January 1, 1969. It was intended to be the same for everyone and relatively easy for the state to collect. It is a general tax on the consumption of goods and services that is collected at every stage in the production and distribution chain.
The value-added tax, or the VAT, as we often say, is estimated to bring in 568 billion of our total tax revenues. This is approximately one-fifth of the public sector's tax revenues. The value-added tax is thus an important foundation in the robust tax system that is the base of the Swedish welfare. The VAT was introduced once to further develop the common welfare state. This we are broadly in agreement on in the chamber.
As a general rule, we Social Democrats believe that the VAT should be of a uniform character with as few exceptions as possible. There are many reasons for this, such as the tax system should be easy to understand, but perhaps above all the distortion of competition that separate tax rates can lead to through the boundary problems that arise from having different product categories with different VAT.
We are also governed by the EU directive which states that member states must have a standard tax rate that may not be lower than 15 percent. In addition to that, a smaller number of exceptions with reduced tax rates may be made for goods and services that are specified in an annex to the directive.
In the Swedish system, as you know, there are three VAT rates: a standard VAT rate of 25 percent and two lower VAT rates of 12 and 6 percent respectively. It is easy to understand that this has led to various discussions regarding boundaries and delimitations.
Mr. Speaker! In order to safeguard the value-added tax as an effective source of revenue for the financing of the welfare system, we want to be cautious about expanding the exemptions from the normal VAT rate. We want to be restrictive in granting more goods a lower VAT of 6 or 12 percent, even though this in itself could, of course, have positive effects for individual industries. There may also be political incentives to facilitate the consumption of goods and services. The Social Democrats therefore support the committee's proposal to reject the motions that propose changes to the tax rate.
Even in cases where the purpose is well-intentioned, such as in the motions proposing a reduced VAT on period products, we believe that measures other than a VAT reduction should primarily be tested.
A comparison can be made with the discussion on lowering the food VAT, which has intensified recently due to the difficult economic situation for many Swedes. It is, of course, tempting to call for tax cuts when the food queues outside the aid organizations grow and when the government's and the Sverigedemokraternas passive economic policy hits the very poorest, against families with children and many others who in many cases already live with small margins. But we still do not believe that a reduction of the value-added tax is the right way to go.
The Swedish National Audit Office's 2018 report on reduced VAT on food, which is mentioned in the committee's report, showed that a reduction is not a cost-effective measure to strengthen the purchasing power of families with children and low-income households. Reduced VAT on, for example, food implies a support for everyone who consumes food, regardless of whether they have children or not and regardless of whether they are low-income earners or high-income earners. There, we Social Democrats believe that there are better ways to support these households, for example, an increased child allowance.
Mr. Speaker! A development towards an even more uniform VAT would be desirable in several ways, but there is still a long way to go. First, a larger tax inquiry is needed, which must also take into account and be linked to the tax revenues that the state needs to bring in given the demographic challenges that Sweden faces.
In conclusion, Mr. Speaker, I move for approval of the committee's proposal.
Per Söderlund (SD)
Mr. Speaker! The hour is late, and I see that many are tired here in the chamber. I will shorten my speech somewhat, if it is not received too negatively.
I would like to begin by moving for approval of reservation 1, even though we have, of course, not changed our opinion regarding our other reservations in this matter.
Mr. Speaker! Sweden applies reductions of value-added tax rates as well as full exemptions where value-added tax is entirely waived for certain goods and services. The basis for this is the EU's tax policy, which Sweden has previously chosen to align its value-added tax legislation with. This does, however, entail certain complications for the business sector and for the public sector, where both investments and welfare services may be omitted, despite the intention to carry out these.
The consequence of this can be lower economic development than would otherwise have been the case, which in the long run can lead to missed job opportunities and likely poorer international competitiveness.
A review of the system is needed for an increased degree of harmonization. But the question of value-added tax is complex, and there may still continue to be areas with a need for reduced value-added tax.
The system of differentiated value-added tax rates entails problems with boundary lines, as we just heard, and definition issues, which in some cases can be perceived as illogical or deeply unfair.
The tourism and visitor industry has several examples of illogical differences in value-added tax. One such example is that 6 percent VAT is applied to entry to swimming halls, while 25 percent VAT is applied to entry to adventure baths. Another is that the VAT on lift tickets is 6 percent, while the VAT for those who ride a dog sled up the hill on their skis is 25 percent.
We want to see an investigation regarding the conditions for further harmonizing the value-added tax rates for different tourist attractions, where equivalent activities should be taxed more uniformly, while the scope of the standard tax rate needs to be evaluated.
Mr. Speaker! We also safeguard culture and see a value in continuing, for the time being, the reduction of the culture VAT for the people's active participation in culture. But just as in the tourism and visitor industry, there are also a number of strange delimitations within the cultural area when it comes to reduced value-added tax.
When you buy a book, go to a museum or see a concert, you pay a so-called culture VAT of 6 percent. The VAT for admission to concerts is therefore 6 percent, unless it is intended that you are to dance at the concert, in which case the VAT suddenly jumps up to 25 percent when what we usually call the dance band VAT kicks in.
If a band plays concerts for a seated audience, there is thus 6 percent VAT on the entrance ticket, but if the same band plays on a dance floor with exactly the same songs, the VAT is 25 percent. This means that a person who appreciates dance band music but does not intend to dance must pay a higher price to see their favorite band perform.
These are some examples of the type of inexplicable differences in the tax legislation that need to be investigated.
Marie Nicholson (M)
Mr. Speaker! It is fortunate that it is VAT that is the subject of tonight's final debate, for few things are as invigorating as a VAT debate.
The value-added tax will bring in approximately 600 billion kronor this year and is thus the Swedish state's second largest source of income. As a fiscal tax, it is effective, it is difficult to evade, and it is fair. It makes no difference who the final consumer is but hits everyone equally. And there is a certain freedom in the value-added tax in that we as consumers can still choose whether we want to consume or, in most cases, at least how much we want to consume.
In Sweden, we have had VAT on goods and services since 1969, and during that time many changes have been made to the legislative text, both regarding the tax level and the harmonization with the EU's VAT directive. Through this, we have today landed on a standard tax rate of 25 percent, with two reduced rates of 12 and 6 percent.
In today's consideration, we are dealing with a number of motions which, for reasons of good heart, propose more goods and services that could be moved from the standard tax rate to the exemption levels.
Mr. Speaker! It is not an entirely easy task to attempt to steer consumption. Above all, it is not easy to stimulate consumption of a good or a service, which is sometimes the motive behind a VAT reduction.
Firstly, the price of a good or a service is not the only thing that determines demand. Secondly, a VAT reduction does not always result in the price to the consumer falling fully, or at all in that regard, but it is perhaps used instead to increase a company's margins.
In 2002, the VAT on books and periodicals was lowered from 25 to 6 percent. The motive for the reduction was to encourage more groups to start reading books. It was a good motive, in my opinion. But when the effects were later reviewed, it could be stated that, on the one hand, the VAT reduction did not fully come through in the price, especially not on periodicals where the gap was extra large, and on the other hand, the goal of creating an interest in reading among new groups was not achieved at all. Instead, it was those who already bought books who bought more books. The political motive might have had greater success with other tools than a subsidy of the VAT.
Another example is the VAT on food, which was lowered to 12 percent in 1996. The idea was that a lower VAT on food would be reflected in the prices and particularly benefit families with children and low-income households because they spend a relatively large share of their household budget on food.
A price commission was appointed which found that in the short term, the reduction had a price impact. But when the Swedish National Audit Office in 2018 reviewed the reduction of the food VAT, it was noted that the measure was not cost-effective. If the purpose of the subsidy was to provide support to only certain groups, it would have been more effective to use corresponding funds and, for example, lower the tax on income only in those income deciles.
Recently, we debated VAT on certain repairs here in the chamber. The VAT reduction in 2017 was intended to stimulate the circular economy, but the effects largely remained out.
What I want to illustrate with my three short examples is that even though the value-added tax is a good fiscal tax, it is a poorer political steering tool, often with questionable precision. We should spend less time and effort discussing different VAT levels and exemptions.
The coalition parties agree to lower the tax on labor during the mandate period. It is a significantly more important reform that strengthens households' opportunities to make wise choices, heart-felt choices in their consumption, and which naturally also makes it easier to find room for what is necessary.
Helena Lindahl (C)
Mr. Speaker! The Centre Party supports all the reservations, but for the sake of time, we move for approval of only reservation 7.
VAT accounts for a fairly large part of the total tax revenues, in fact more than one-fifth. At the same time, VAT is a fairly complex part of the tax system.
When I, as a newcomer to the Committee on Taxation, now try to familiarize myself with the inscrutable secrets regarding VAT in Sweden, I realize that it truly is a jungle - there are quite a lot of exceptions to the rules. But it must be even worse for those who have to handle these rules. I am thinking of companies and non-profit organizations that have to spend a lot of time on this thicket. Something that exacerbates this is that they have to handle international regulatory frameworks, not least from the EU, when it comes to the same.
I want to point out that the Center Party believes that the VAT needs to be reviewed in a broader tax reform. We believe that the possibilities for a broadening of the VAT base need to be reviewed in order to create a more easy-to-understand and uniform system. My colleague from the Moderates mentioned something about this just now, and I can only agree.
Cecilia Engström (KD)
Mr. Speaker! The VAT system is unfortunately anything but simple. According to the Business Rules Board, tax rules are the most common source of regulatory complexity that many entrepreneurs testify to. Not infrequently, it is precisely the VAT that causes problems. The different VAT rates of 6, 12, and 25 each entail a long series of boundary-setting problems.
An industry that is hit hard by inconsistent VAT rules is the tourism industry. For example, guided tours have different VAT rates depending on where they are carried out and also depending on which vehicle is used.
Mr. Speaker! The biggest problem with the VAT system is that property owners today can join the VAT system voluntarily and then pay VAT on, for example, purchases of materials and services. As long as the property owner only rents out the premises to another VAT-liable business, the property owner is entitled to deduct their VAT costs. But if the VAT-liable tenant leaves the premises and a new non-VAT-liable business from, for example, civil society wants to move in, problems arise. This is because the landlord can no longer deduct input VAT. This makes the property owner's purchases 25 percent more expensive. But what is actually worse is that the VAT deductions that were made several years ago must be repaid.
The result is that the premises stand empty instead of being rented out. This also means that sports clubs and others from civil society will have more difficulty finding somewhere to be.
Mr. Speaker! The Christian Democrats argue that the VAT system must be investigated in order to facilitate the rental of properties and premises for activities other than VAT-liable activities. It would improve the efficiency of the use of premises. It would mean that the association life could spend less time chasing premises and more time on its activities. It would also simplify for property owners to adapt the operations to the demand that exists.
Mr. Speaker! VAT is an effective tax that should be protected as a source of revenue for the state. But the Christian Democrats believe that a VAT review needs to take place. The purpose shall be to simplify and harmonize the VAT. Simplicity for those affected must be the guiding principle in this work.
I vote in favor of the committee's proposal and against all reservations.
Marielle Lahti (MP)
Mr. Speaker! I have previously spoken a bit about tax policy as a tool to build the society that we want. I intended to continue on that track linked to VAT, value-added tax.
It is precisely about what I mentioned earlier, about what we consume that is bad for the environment, the climate, and humans. If this were to bear its actual costs through taxes, consumption would have decreased.
We have different tax rates, as previous speakers have also said. It is 25 percent, 12 percent and 6 percent. Sometimes I can think that it is a certain arbitrariness, and I can therefore welcome a review.
But I want to speak specifically a little bit about a tax that was mentioned earlier and which concerns repair.
On 1 July 2022, the tax rate on repairs of bicycles, shoes, leather goods, clothing, and household linen was lowered from 12 percent to 6 percent.
The government, together with the Sweden Democrats, has in the state budget for 2023 doubled this VAT on repairs for certain goods from 6 to 12 percent from 1 April.
Before I get to my motion, I would like to dwell for a moment on the question of reduced VAT for repairs.
Craftspeople, tailors, bicycle repairers and shoemakers play an important role in the transition to a more sustainable and circular economy. In order for us to be able to take care of our resources in a more efficient way, entrepreneurs with craftsmanship who can fix and repair what has broken are required.
Raising the VAT on repairs is a step in the completely wrong direction, we believe. It can contribute to less sustainability and more waste. On the contrary, it must become more favorable to repair and fix what one already has.
Momsen på reparationer sänktes i två steg från 25 procent till 6 procent så småningom av den tidigare regeringen för att göra det lättare och billigare för konsumenter att laga det som man redan har. Att laga sin cykel, justera ett av sina gamla favoritplagg eller fixa till sina finskor tar mindre naturresurser i anspråk än att köpa nytt.
Mr. Speaker! Those who are interested in creating a more sustainable economy should therefore want to facilitate the use of repair services.
In a survey that Hantverkarna in Stockholm recently conducted, 89 percent of Stockholmers say that they to a large extent or to a fairly large extent think 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 also leads to a higher price and creates difficulties for the repair companies. The more companies, the better the availability becomes. The reduction is therefore a step in the wrong direction.
The companies affected are furthermore small companies with no or few employees. That the government, in this tough economic situation, which we have heard about earlier today, chooses to make things more difficult for this type of company is completely incomprehensible.
Politicians should promote repairs, not oppose them. It is not sustainable that things are thrown away when they can be repaired and used again. Therefore, the government should support the small business owners who contribute to a more circular and sustainable economy instead of raising the tax for them.
I leave that question and now move on to my motion. I move for approval of reservation 3 in the matter of value-added tax, on a completely different theme.
Having a period is not a choice, but it is something a woman has to live with. But having VAT on period products, such as menstrual cups, pads, or tampons, is a choice, a political choice. For a woman who menstruates for about 40 years, period products can cost 48,000 kronor - given inflation even more, of course.
Previously, decision-makers have referred to the fact that a change of the VAT must occur after a decision at the EU level. The EU member states decided in 2016 that member countries may lower the value-added tax on tampons and pads to 0 percent. It is therefore now possible to make the change.
In the current situation, most EU countries have tampon taxes of 20 percent. But Scotland has stepped forward and decided on free period products for all women. Canada, the United Kingdom and Ireland have abolished the VAT on period products completely. In Sweden and Denmark, the level is 25 percent. France lowered the VAT in 2015, from 20 percent to 6 percent. Sweden therefore has a higher VAT than most EU countries.
Mr. Speaker! Success has also been achieved in the USA and India regarding the abolition or reduction of VAT on pads. It is high time for us to contribute to economic equality by making sanitary napkins VAT-free.
We have, as we have said, submitted many good proposals in the area of tax policy, but today I am therefore moving for approval of reservation 3.
Marie Nicholson (M)
Mr. Speaker! I will be brief. Thanks to Marielle Lahti for an interesting speech!
As I described in my speech, the value-added tax is not suitable to be used as a political steering tool. The Green Party has now submitted a motion to completely remove or lower the VAT on menstrual products. In that case, we are not talking so much about a steering tool but rather about a subsidy of products for reasons of justice. Even here, however, the VAT becomes a rather blunt instrument, because we can monitor the price impact but cannot control it.
The question we should rather be asking is whether all women in Sweden need this subsidy. I believe that Marielle Lahti and I nevertheless agree that that is not the case. My question is therefore: Why does Miljöpartiet want to use state resources to subsidize sanitary napkins for high-income earners? How is that fair?
Marielle Lahti (MP)
Mr. Speaker! A very good question, member! I would like to thank you for the remark. It is completely true that it becomes a blunter instrument than when one targets or gives some form of contribution. There are different ways to provide this type of subsidy, but we believe it is important to make a VAT reduction down to zero on period products for everyone who purchases such products. We believe that it is a wise decision to do so and that one effectively achieves the desired effect. We then follow the countries that have good experiences from their attempts in the area, as I mentioned earlier.
Marie Nicholson (M)
Mr. Speaker! One might think it is fair to exempt a product from VAT when half the country's population does not have many alternatives. I think, however, that one should ask whether gender rather than purchasing power should be decisive for a subsidy.
If one wants to make it easier for women to buy menstrual protection, one should make it easier for those who actually need it, for example by lowering the income tax or, as the government is now doing in the autumn budget, increasing the housing allowance for particularly vulnerable families with children. This is a group that consists of 60 percent single mothers, who now find it a bit easier to manage their everyday finances.
I think that Marielle Lahti and I will manage well without a specific menstrual tax.
Marielle Lahti (MP)
Mr. Speaker! I do not think we need to lower the income tax. I do not think that this, purely economically, helps all young girls and women to be able to buy period products, but I believe that it is a much blunter tool.
Increasing the housing allowance is good and well-intentioned; I think so too. I do not believe, however, that it will have a direct effect for the woman or the young girls in a household in the same way as a reduction of the VAT on sanitary products.
Cecilia Rönn (L)
Mr. Speaker! I thank you for allowing us to conclude the debate. I, too, have shortened my speech.
Sweden needs a simple tax system that encourages work, entrepreneurship, education, and saving, and that meets international competition. The Liberals believe that the VAT needs to become more uniform and simplify the conditions for companies.
The value-added tax was introduced in Sweden on 1 January 1969. It is a general tax on the consumption of goods and services that is collected at all stages. The idea is that it is the consumer who ultimately is to pay the tax.
Normally, it is the business owner who sells a good or service who is to pay the tax to the state after having made a deduction for the value-added tax paid upon purchase of the good or service. The companies simply administer this for the state for free, and therefore a minimum requirement should be that it shall be as simple, clear, and uniform as possible.
But unfortunately, that is not the case. We politicians cannot refrain from adjusting the VAT to change certain behaviors that we consider better or worse, or to favor a certain type of trade; we can see this in the motions that have been raised in this area.
In 1991, the VAT was uniform for an entire year. That year, the state did not place any valuation on what you bought, but since then, the VAT has been poked and adjusted so that we now have a thicket that is often difficult to unravel. We politicians have created a VAT monster.
Mr. Speaker! Today, the differentiated VAT in many cases leads to difficult-to-interpret and complicated rules for companies and to an administrative burden that is only an extra cost for these companies. My colleagues have already mentioned a number of concrete examples of how difficult it can be to know which VAT one should pay, and I do not intend to repeat them. The examples that my colleagues have mentioned are good arguments for why the VAT should be made more uniform. This would have simplified things for the companies.
Another argument for why it is not effective to lower the VAT is that it does not benefit the end consumer, just as the Moderate member said here in the rostrum. When the Swedish National Audit Office in 2018 evaluated the reduction of the food VAT that was implemented, it turned out that the reduction did not provide the effects it was intended to give. Instead, it was an expensive reform, which according to 2018 calculations cost the taxpayers 30 billion.
If one wants, there are accurate reforms that provide more in the wallet to those who actually need it the most. The government presented examples of this in its spring budget on Monday.
Reducing red tape for companies is part of the agreement in the Tidö Agreement. The VAT issue is a good example of red tape that can be eliminated or reduced. I look forward to us making adjustments here so that it will be simpler and definitely easy to do correctly.
Mr. Speaker! It is also important that VAT within Europe becomes easy to manage. This is especially important for a small export-dependent economy like Sweden. The Liberals' goal is that Swedish companies should be able to conduct their business easily throughout the economic area, which is one of the union's core missions. Therefore, it is good and welcome that simplifications are being made within the EU to, among other things, make it easier to report VAT when one has sales in several EU countries, the so-called one-stop shop.
At the same time, it is important that we in the Committee on Taxation also monitor that the regulatory burden does not increase for companies when new directives are implemented and that the benefit is always balanced against the increased administration it entails.
With that, I move for approval of the committee's proposal.
The deliberation was hereby concluded.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.