Value Added Tax

Ida Ekeroth Clausson (S)

Mr. Speaker! "Such a policy presupposes, in order to succeed, that the burdens of crisis policy are distributed according to capacity and that the principle of all people's equal value is upheld in everyday work. The welfare for the many must be defended and employment secured. It is a policy that unites and does not divide the nation. It is a policy that is built on responsibility for Sweden."

Thus concludes Olof Palme's government statement from 1984, a government statement that also came after difficult economic times with high inflation. Much has happened during the 40 years that have passed since Palme's words, but they are still relevant today. Today, a different economic policy would be needed, where despite an inflation economy we must see the opportunities we have. The fight against inflation shall not primarily be borne by those with low or normal incomes, but this we must do together.

Today we are dealing with the Committee on Taxation's report SkU14 Value Added Tax. The main task of the tax system is 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 with general rules and broad tax bases and not least that the level of the taxes is well-balanced against the goals of the economic policy and the ambitions we have with the welfare.

Clear rules do not only contribute 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 reduced if the system is easy to understand.

Mr. Speaker! As we Social Democrats write in our special statement, since the tax reform in the early 1990s, a large number of deviations have been made from the principles of broader tax bases and a more neutral and uniform taxation of different types of income, investments, and forms of savings, as well as different parts of private consumption. All these deviations have collectively led to the fact that today's tax system is characterized by major deficiencies. The need for a new comprehensive review of the tax system is therefore great, and this also includes value-added tax. To avoid boundary problems, ambiguity, and unpredictability for both individuals and companies, such a review needs to take place. The fundamental reasons for this are that the tax system should generate stable revenues to finance our common commitments and, in addition, be simple for individuals and companies.

In view of this, we support the majority's position to reject all motions. 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 tax changes should primarily be examined.

The issue of dance band VAT could be solved by lowering the VAT for dance bands. Then we would stop distorting the competition between, for example, the dance band Arvingarna and the house group Swedish House Mafia. But then a new distortion arises, namely that there would be different VAT on dance events where one dances to a live band, 6 percent, and where one dances to music from a tape player, 25 percent. This problem could, of course, be solved by also lowering the VAT on going and dancing on a dance floor, but then a new distortion arises, namely that the one who likes to dance on a dance floor pays 6 percent in tax on their dance while the one who likes to dance at a nightclub pays 25 percent for their entertainment.

This can continue for all eternity. An attempt to level a tax injustice often only creates a new injustice somewhere else.

Regarding the right to deduct VAT for harness and gallop racing practitioners, I have previously submitted an interpellation to the Minister for Finance on the matter. It is worth noting that there is no specific regulatory framework regarding horse sports specifically, but rather it concerns a legal assessment of what constitutes economic activity. The Tax Appeals Tribunal, in a preliminary ruling from December 2023, considered that under the conditions specified in the application, it constitutes an economic activity when three to four harness horses are continuously provided for participation in competition races against compensation in the form of prize money. The preliminary ruling has, however, been appealed to the Supreme Administrative Court. We will continue to follow the issue but maintain that an announcement at this stage is not the right way to proceed.

Mr. Speaker! In summary, we from the Social Democrats see that the arguments for more exemptions regarding value-added tax may be good, but in these cases, there are also arguments against the changes being implemented. In combination with the fact that we Social Democrats want to safeguard a uniform VAT system, we support the committee's proposal to reject the motions.

(Applause)

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

Per Söderlund (SD)

Mr. Speaker! To begin with, I would like to move for the approval of reservation 1 so that I have that settled.

Mr. Speaker! Sweden applies reductions of value-added tax rates as well as complete exemptions where the value-added tax is entirely waived for certain goods and services. The basis for this is the EU's tax policy, which we in Sweden have previously chosen to align our value-added tax legislation with. This, however, entails certain complications for the business sector and the public sector, where both investments and welfare services may be omitted despite the intention having been to carry them out. The consequence of this can be a poorer economic development than would otherwise have been the case, which in turn ultimately leads to lost job opportunities and likely poorer international competitiveness.

A review of these systems 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 certain problems regarding boundary lines and definition issues, which in some cases can be perceived as illogical or deeply unfair.

Within the tourism and visitor industry, there are several examples of illogical differences in value-added tax. One such example is that the person who rides a lift in a ski slope pays 6 percent in VAT on the lift ticket. But if one, for some reason, would want to ride a dog sled up the hill instead, the VAT on the same journey is 25 percent. If one then wants to take a dip in the bathhouse when finished in the ski slope, the VAT on the taxi ride there is 6 percent, but if one had chosen the dog sled instead, the VAT is, as mentioned, 25 percent on the same journey. If it is only exercise swimming in the swimming hall when one arrives, the VAT on the entry is 6 percent. But if the swimming hall has a water slide, the VAT on the entry suddenly becomes 25 percent.

These are just a few examples of the absurdities that the VAT system entails and that entrepreneurs need to manage daily in their operations. We would like to see an investigation regarding the conditions for further harmonizing the VAT rates for different tourist attractions so that similar operations are taxed more uniformly. At the same time, the scope of the standard tax rate needs to be investigated.

Mr. Speaker! We also safeguard culture and see a value in continuing, for the time being, the reduction of the cultural VAT for the people's active participation in culture. But just as within 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 one buys a book, visits a museum, or sees a concert, one pays a so-called cultural VAT of 6 percent. The VAT on admission to concerts is therefore 6 percent, unless it is intended that one should dance at the concert. Then the VAT suddenly jumps up to 25 percent; that which is commonly called the dance band VAT kicks in. If a band plays concerts for a seated audience, the VAT on the entrance ticket is therefore 6 percent, but if the same band plays exactly the same songs on a dance floor where dancing occurs, the VAT is 25 percent.

It means that a person who appreciates dance band music but does not intend to dance nevertheless must pay a higher price to see their favorite band than the person who prefers to listen to other music. It is an example of the type of inexplicable differences in the tax legislation that need to be investigated.

Mr. Speaker! Since Sweden applies a number of exemptions in the value-added tax area, certain situations arise where an investor who wants to offset input and output value-added tax against each other cannot always do so. This leads to new businesses not emerging in a natural way, which in turn slows down growth in the economy.

It could concern a real estate company that wants to rent out premises to different types of businesses but does not see that it is possible due to current rules for value added tax, why rentals and thus investments may be omitted.

One such example is when someone wants to convert a commercial premises into housing. In those cases, the property owner can be hit by large costs as value-added tax must be repaid, sometimes for several years back in time.

In a petition from Svenskt Näringsliv from 2018, these problems are pointed out. Changes to the rules are proposed there, including an abolition of the requirement that activities involving tax liability or the right to a refund be conducted in the premises.

It should therefore be possible for a landlord to become voluntarily taxable even if the tenant does not conduct value-added tax-liable activities or is entitled to a refund.

Sveriges allmännytta has joined the petition. In a memorandum from 2022, Skatteverket explains how they view the issue and submits proposals on how to resolve the problem.

Within the Government Offices, both a memorandum from the Ministry of Finance regarding voluntary tax liability upon the rental of premises and the memorandum from the Swedish Tax Agency with proposals for amended rules for voluntary tax liability are being prepared.

We consider that to be positive, as we see a need for a review of the conditions for voluntary tax liability specifically in the case of renting out business premises, and we hope that the government wishes to consider this.

(Applause)

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

Marie Nicholson (M)

Mr. Speaker! I have probably heard tax described as a nuisance a number of times in my life. But when it comes to taxes, the value-added tax can still be said to be one of the better ones. It is an efficient tax that every year accounts for nearly half of the state's revenues and which finances nearly half of all state activities. In terms of size, it corresponds to approximately twice as much as what our defense, police, judiciary and all education cost annually.

It is also a tax that is often clear to the consumer. It is difficult to avoid, difficult to tax-plan around, and it is largely the same for everyone. On the other hand, VAT is not a tax that is particularly effective at either encouraging or discouraging people's choices or behaviors. The precision is poor, and exemptions are costly.

The Social Democratic government of Persson, for example, lowered the VAT on books from 25 to 6 percent in 2001. The purpose was that more and new social groups should discover the wonderful world of literature. It is a very laudable thought, I would like to add.

Unfortunately, the result was not at all what was expected. The VAT reduction did not take full effect in the price of books. Admittedly, more books were sold than before, but not to new groups of readers; instead, it was the regular book buyers who simply bought more. This reform was calculated to cost 1 billion kronor upon implementation.

Another example is the reduction of the VAT on food, which was also hammered through by a Social Democratic government in 1996. The reform was intended to benefit families with children and low-income earners in an economically difficult time. It did, of course. But the Swedish National Audit Office has later been able to show that at half the cost of the reform, the same effect could have been achieved by instead lowering the tax for the lowest income deciles.

In 2019, the reduction of the food VAT was estimated to cost 32.2 billion kronor. It is thus the single largest tax expenditure. In total, the tax expenditure for all exemption levels exceeds 64 billion kronor. These are tax expenditures that need to be compensated by using other, less efficient taxes than VAT as revenue for the state.

In addition to a base level of at least 15 percent, which Sweden far exceeds, the EU also allows for some exceptions according to a jointly agreed list. There are many legitimate opportunities to make exceptions here, and the majority of today's motions also concern various goods and services that should be included on the list of exceptions. These are good proposals that in many cases deserve to be considered. The problem with exception levels is that they open up a problem regarding the interpretation of the EU directive and regarding the demarcation.

Mr. Speaker! Now comes another list of absurdities that my colleagues in the Committee on Taxation have already spoken about. But if it feels like a repetition, some of the absurdities on the list are cross-bloc.

If you go to a concert, it is counted as culture, and then it is 6 percent. If you do training dance, it is a sport, and then it is also 6 percent. If you, however, go to listen to a dance band on a Saturday night, it is neither culture nor sport, and then it becomes 25 percent.

It is about this matter of culture. Theater is of course culture, and then it is 6 percent. But cinema no longer has the same status, and then it is 25 percent.

Plants that are edible are counted as food in some cases, and then it is 12 percent. But in some cases they are only counted as plants, and then it is 25 percent.

Mr. Speaker! Water that you drink directly from the tap comes with 25 percent VAT, while bottled water is a food item, and then it is 12 percent. Liver pâté for my children has a VAT of 12 percent. But liver pâté for my dog has a VAT of 25 percent.

The share for passenger transport is 6 percent. It is also that for bus, train and ferry. But here, even the somewhat more unusual transport methods hot air balloon and fishing trip are included.

Dog sledding is not, however, a passenger transport, and neither are horse rides if they contain a certain degree of excitement and adventure. In that case, it is 25 percent.

Mr. Speaker! If you are going to go out for a horse ride, make sure it is dull and routine. Because then it is a passenger transport, and the VAT is 6 percent.

It is easy to be forgiven if one puts on a smile, but there is a seriousness behind this. The possibility of exceptions leads to different industries, different goods, and different services being pitted against one another. Money, time, and effort are spent on showing that just one specific service should be a special interest and qualify for an exemption level.

Different VAT rates require more administration from both authorities and companies, and unfortunately, it also opens up the possibility for fraud. The cost of administration for different VAT rates is high.

If the exemption levels were removed entirely, the general VAT could be lowered to 21 percent without any loss of income for the state. However, it is not a reform that can be implemented in a heartbeat and not without a major general review of the tax system.

Until such reform work can be prioritized, it is wise to have a restrictive stance towards changes in VAT rates and to introduce such only with restraint and wisdom. I move for approval of the committee's proposal.

(Applause)

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

Vasiliki Tsouplaki (V)

Mr. Speaker! Every day across our country, thousands of actions are carried out by voluntarily engaged people. Sports teams are coached, food is distributed to those in need, emergency calls are received from people in crisis, and study circles and social activities of various kinds are organized.

The various branches of civil society bring together 6 million people in our country. Without their efforts, our society would be worse in every way. They contribute to democracy, community, and increased education.

Without our popular movements and their struggle for democracy and universal and equal suffrage, we would not be standing here debating today. There has been a broad political consensus on the value of civil society in this chamber. It is both with sadness and concern that I see that is no longer the case.

Mr. Speaker! Since the government took office with the support of the Sweden Democrats, we see a clear shift. In area after area, the government and the Sweden Democrats are making cuts that directly affect people's opportunities to educate themselves, organize themselves, and influence the social debate by making their voices heard.

The Tidö parties are worsening the safety and legal certainty for people with a foreign background and at the same time removing the grants to the associations that have historically organized just those people. 18 million disappeared in one fell swoop. These are calculation errors in the state budget, but it is the entire state support to Sios, which has existed for 50 years as an umbrella organization for ethnic associations.

One pushes for NATO membership and increased involvement in international conflicts while simultaneously removing support for peace organizations. The national consumer organization loses state support for unclear reasons. One conducts an environmental policy that increases harmful climate emissions. At the same time, critical environmental organizations are portrayed as threats to democracy.

One wants to weaken the partisan opposition by pulling the rug out from under partisan lotteries. One cuts significantly in the study associations' grants. A third of the state support is to be removed during this mandate period. The latest announcement is that civil society's share in aid work will be changed. 2,000 agreements are being torn up this year by Sida.

It is perhaps a change regarding inheritance tax and funding through the General Inheritance Fund that is next in line.

Mr. Speaker! In addition to favorable economic conditions, civil society needs clear and easy-to-interpret regulations, both legal and tax-related, so that the non-profit board can easily do the right thing.

We in Vänsterpartiet are constantly trying to find different ways to improve the conditions for civil society. In our motion being discussed in the tax committee's report, we have noted how the lack of premises excludes many who would like to be part of an association. Above all, it is sports clubs that are sounding the alarm about difficulties in obtaining premises.

Since 2016, it has been extra difficult for them to rent premises, because Skatteverket then made a new interpretation of the regulatory framework. Riksidrottsförbundet, which organizes approximately 3 million people in our country, sees a great risk with the current situation.

The lack of premises can force a corporatization of the non-profit associations. We want this sports activity to be built on member democracy and influence. It would be unfortunate if one would have to go this way to secure training times for children, young people, and adults who want to be active.

Mr. Speaker! I have previously been involved in the fact that the Left Party, together with other parties in the Committee on Taxation – I believe it reached a consensus in the end – had a notification pushed through regarding a change in the tax area that would benefit civil society. It concerned the abolition of the so-called internal VAT.

I believe that the proposal we have submitted today can also be considered to have received a positive reception. Based on what I can discern from the response to our motion, the proposal from Malin Danielsson in the Liberals and the motion from the Center Party, there may be a consensus regarding facilitating for non-profit organizations to rent premises, even though there is currently no finished proposal from the government to take a position on.

It is good so, I think. The question I ask myself is only: Which associations will be able to afford to pay for a local venue in the future if the Tidö parties continue with their cuts of the association life?

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

Cecilia Engström (KD)

Mr. Speaker! It is the entrepreneur who sells a good or service who pays the value-added tax, the so-called VAT, after having made a deduction for their input VAT. The idea is that the tax shall be passed forward in each link so that it is ultimately paid by the final consumer.

The goal is that the rules in the tax area should be simple and clear and that the administrative burden for the companies should be limited.

In the Swedish VAT Act, there is a main rule of a VAT rate of 25 percent. Additionally, there are two lower tax rates - 12 percent and 6 percent. Sometimes, as we have heard earlier here, the VAT is used to favor certain activities. For example, the VAT on books is 6 percent.

VAT is an effective tax that should be protected as a source of revenue for the state - we can all agree on that. The starting point should be that the standard tax rate should be used to a greater extent. Then the VAT rate would be lower than today's 25 percent.

Among other things, the Swedish National Audit Office's investigation into the reduced food VAT has shown that it is not an effective way to support families with children and low-income households. We Christian Democrats still believe that an increased housing allowance for economically vulnerable families with children is more accurate for supporting these groups. It is usually single mothers who have a low-paid job who struggle to make ends meet. We are therefore pleased that the government continues to prioritize the enhanced housing allowance for Sweden's most vulnerable families with children.

Mr. Speaker! As has been mentioned previously, the Christian Democrats safeguard the standard VAT and the VAT as an effective source of tax revenue. It is always easy to find reasons for exceptions and special solutions within the VAT area, but it is rarely the most distributionally effective method. Even if the purpose once upon a time was to facilitate, in reality it has often become exactly the opposite. The consequence is a poorly thought-out regulatory framework that creates boundary-setting problems for both companies and organizations. The exceptions in the VAT system over the last 30 years have created asymmetry, and they appear illogical.

The different VAT rates, the many exemptions and exemptions from exemptions are a constant source of headache for both entrepreneurs and organizations. Indirectly, it naturally affects the end consumers, the private individuals. There is also another problem, and that is that the tax system becomes inconsistent. This means that confidence in the tax system can decrease, and that is harmful to our society.

Mr. Speaker! We have previously spoken about the housing market. There, tenants do not pay VAT. It is an arrangement that fundamentally has a good purpose. But this has had major negative consequences, both for civil society and for property owners. The idea behind the VAT exemption when it comes to rents appears sympathetic with the laudable purpose of keeping costs down for the tenant. But in reality, there is much that indicates that the system is not at all becoming so.

Exempt rental, in fact, leads to the fact that the real estate companies also do not get to deduct their input VAT, which means an increase in costs for them. Naturally, they ensure that they get cost coverage for this by including it in their costs and adding it to the rent for the final consumer.

Mr. Speaker! There is a great housing shortage in Sweden. We need to get construction started, not least of apartments. One way to gain time and to create a more efficient use of the housing we already have is to convert commercial premises into private residences. But the VAT rules surrounding this make the rental difficult. Property owners have no interest in this because it means they would have to pay unreasonable VAT. They can then no longer deduct their VAT. Furthermore, they must correct several years back when it comes to the VAT they have already deducted.

Other consequences that arise concern civil society, which conducts VAT-exempt activities. They have difficulty finding suitable premises. Property owners cannot rent to VAT-exempt activities because such activities prevent the property owner's ability to deduct the input VAT.

The state should encourage voluntary organizations and personal idealism, not put spokes in the wheels.

The independent schools' and preschools' opportunities to find suitable premises are also hindered because they operate a non-VAT-liable activity.

The issue of voluntary tax liability for the rental of premises has been championed by the Christian Democrats for a long time, and the issue is now being prepared in the Government Offices. We hope that proposals and solutions to the problem will be presented in the future.

Mr. Speaker! As a Christian Democrat, I also want to say that I am very pleased that the government has now appointed an inquiry to look into simpler VAT rules for gifts and the sale of used goods.

The purpose is to investigate whether the regulatory framework can be simplified and become more predictable in order to, among other things, reduce the administrative burden for the companies concerned, which in turn can contribute to products being used in a more efficient and sustainable manner.

We Christian Democrats believe that all good forces are needed in society, and it is important to facilitate for everyone to do good. We already have the gift tax deduction for private individuals, but now we hope that the investigation will open up for deduction rights also for legal entities' gifts to non-profit activities and civil society.

I take this opportunity to remind you of a seminar next week on April 17 which deals with precisely these issues.

I vote in favor of the committee's proposal.

(Applause)

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

Vasiliki Tsouplaki (V)

Mr. Speaker! I actually have no question for Cecilia Engström, but I forgot to submit a motion when I was at the rostrum earlier. I take this opportunity to move for the approval of the Left Party's reservation 9.

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

Helena Lindahl (C)

Mr. Speaker! VAT brings in large sums to the Swedish state. I amused myself by googling a bit yesterday, and I obtained figures from 2022. At that time, VAT brought in approximately 560 billion to our state treasury. That is approximately one-fifth of the public sector's total tax revenues. It is only the employer contribution and the municipal income tax that are larger.

Mr. Speaker! I do not know if you know, but the value-added tax was introduced in 1969. It then replaced the general goods tax, as it was called at that time. The difference between these is that the current VAT taxes every link in the production and distribution chain based on the value added, while the old goods tax taxed the sale only in the final link to the end consumer.

Over the years, the VAT system has undergone major changes and been broadened. In connection with the tax reform of 1991, more transactions became subject to VAT, for example within the service sector and in the energy area.

In Sweden, there are three VAT rates: 25, 12, and 6 percent. It should be clear, but there are so many exceptions that, just as my colleagues have previously said, it sometimes becomes grey areas and difficult with the boundary-setting problems. It can be perceived as arbitrary for both entrepreneurs and private individuals.

Mr. Speaker! I intended to bring up some areas that have some gray zones which affect civil society and the countryside negatively. Most of you in here can probably figure out what I am going to talk about, namely the internal VAT for civil society and the entertainment tax.

Regarding the internal VAT, the complicated can be made somewhat simpler. In civil society, there are different types of organizations. Some organizations are structured as a single large national organization with sub-departments around the country. Other organizations have several legal entities, meaning one actually belongs to the same umbrella but the sub-departments are separate legal entities. But then problems arise with the VAT. Even if one belongs to the same umbrella and is a separate legal entity, one cannot deduct the VAT if one receives internal help with IT, data, or other administration, whereas the organization that is a single legal entity with sub-departments can do so with ease.

This is not good for civil society. Many times the state provides grants and support to maintain the socially important expertise all around Sweden. At the same time as we give money, we take money back from many of the small associations by them not being allowed to make deductions on VAT. It becomes crazy. It means that many of the small organizations, which already have enough difficulty existing and making their operations viable, find it even tougher.

I come from the countryside and live in a small place with 15 inhabitants, and we have no shop - nothing. But in the surrounding villages, the activities - everything from Studieförbundet Vuxenskolan and ABF to sports clubs - are enormously important. Without them, it would be difficult to offer much of the attractive things that are there anyway.

The government and the Committee on Taxation should give it another thought regarding the internal VAT. I was very disappointed when we discussed the issue last year when the governing parties and the Social Democrats chose not to proceed with the issue. It was disappointing.

The second question I want to talk about is the harness racing VAT. You know that there are more horses in Sweden today than there are cows. The horses and cows do a lot of good for the countryside. They keep the fields open and ensure that there are veterinary services, farriers, and other businesses. Both harness and gallop tracks contribute to many jobs. If I am not mistaken, there are 20-30 harness tracks around Sweden. Umeå is the nearest harness track for me. There is a great public interest. Many own horses, and they enjoy competing with the horses.

Now, the Swedish Tax Agency has taken a new position, namely that harness racing is not to be considered a business activity. One is not allowed to deduct VAT; instead, it is to be seen as a leisure interest. This means that the many people who engage in harness racing will immediately find it significantly more difficult financially to pursue their leisure interest. It will ultimately lead to that only those with the thickest wallets can afford to engage in harness racing. That is not what we want. Here, the state could actually make a different interpretation. But it is sluggish with the Swedish Tax Agency, and now the question will be decided in court. That is unfortunate. If one as a harness horse owner is not allowed to make deductions on VAT, many other jobs in the countryside will decrease, and many fields will grow over. I do not think we want that.

Mr. Speaker! I, just like many others, want to see a review of the allowance system. Perhaps it should be broadened; perhaps it should become more uniform.

It was some years ago that there was a coalition government, but I remember that when I entered the Riksdag, there were many discussions about the VAT on hotels and restaurants. Do you remember that? At that time, it was at 25 percent. Eventually, the VAT was halved. It was necessary and welcome. Many of the entrepreneurs, especially in the countryside, simply could not afford to hire staff, take holidays, or be sick. That was the everyday reality for the service-intensive industries. One did not get much income from what was sold. The most expensive thing is the time for which you pay a wage. But when the VAT was lowered, many companies got a breather and could survive – they could hire, take in staff from time to time, or take a well-earned holiday for a few days.

Mr. Speaker and other friends! The same applies to the craft companies in Sweden. A hairdresser has 25 percent in VAT, and one experiences the same challenges as the hotel and restaurant owners did previously. 25 percent is a huge part of the service, and there are few goods that the hairdressers can make deductions for. In order for the service not to become too expensive, many hairdressers live on the margin.

What would we be without all these service companies? It would extinguish many storefronts in small communities and provide a very meager range of services in these locations. Do we really want that?

I move for approval of reservation 11.

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

Patrik Karlson (L)

Mr. Speaker! In 1969, many major events that are still spoken of today took place around the world. For example, the Woodstock festival was organized over three legendary days. An estimated up to half a million visitors experienced a number of memorable and acclaimed performances by greats such as Jimi Hendrix and Janis Joplin.

Another major event this year was that three astronauts boarded the spacecraft Apollo 11 and carried out the space journey which resulted in the astronaut Neil Armstrong becoming the first human ever to land on the moon.

The question remains whether the biggest event during this year was that the value-added tax - popularly called the VAT - was introduced in Sweden and replaced the general goods tax.

Just like its predecessor, the value-added tax is a tax on consumption whose cost is borne by the final consumer. An important difference between the taxes is, however, that the VAT taxes every link in the production and distribution chain based on the value added - hence the name - while the general goods tax only taxed the sale in the final link to the final consumer.

Yes, you hear - this, if anything, was a revolutionary and great event.

VAT has over the years become an important part of the financing of the common welfare. Today, it is the third largest tax revenue for the public sector, after the employer contribution and the income tax. The normal workflow for collecting this essential revenue for the state is that the entrepreneur pays the tax for their sold product or service after having made deductions for the value-added tax paid at the time of purchase at an earlier point. The minimum requirement for such a system should be that it is simple, clear, and as uniform as possible. We all know, however, that is not the case today.

Mr. Speaker! Unfortunately, the legislation regarding VAT is a fairytale patchwork of many years of political maneuvers and decisions. This has created unfair competition, strange boundaries, and an unnecessary regulatory burden that affected the companies and, consequently, also the consumers in the end. We have heard several examples from the rostrum today. My party colleague Max Sjöberg has written a report on this subject, and I intended to use it to highlight some bizarre examples of how today's design of the Value Added Tax Act works in practice.

A rabbit is today a food item with a VAT of 12 percent if it is dead. As long as it is alive, one pays 25 percent in VAT even if one intends to eat it later. The person who wants to pay a lower price does best by having the breeder kill the rabbit before the purchase. The rabbit breeder must in turn try to figure out if it is intended for the rabbit to be eaten by the human who pays for it or by the buyer's dog, which stands nearby. It is, as we heard earlier, only food for humans that has reduced VAT – not food for animals.

The Swedish Tax Agency has clarified that an assessment must be made in each individual case. Thus, the same item can be subject to different VAT depending on what it is to be used for. Liver pâté for dogs has a higher VAT than liver pâté for humans.

We can take another example while we are at it. Many here surely remember the speeches and debates in the chamber regarding the dance status - perhaps primarily the attempts that have been made to account for what is dance and what is not dance. It becomes equally bizarre when one tries to sort out the VAT rules for music and dance. The tax can, among other things, be affected by how you consume the music, whether you dance, and how you dance. A dance band concert with Arvingarna, where the audience dances, is subject to 25 percent VAT. A concert arranged by an orchestra, where the audience can also dance, however, has only 6 percent VAT.

The reason for this distinction is that dance events are classified as entertainment and taxed at 25 percent VAT, while a concert by an orchestra is classified as culture and taxed at 6 percent VAT. The Swedish Tax Agency must simply determine whether it is a dance event or a concert when Arvingarna perform live on a dance floor. In this specific case, they have so far decided that people primarily go there to dance. This can be compared to an orchestra, whose concerts the audience, according to the Swedish Tax Agency, goes to listen to the music, sit down and watch the performance itself. They can hope that the audience does not at any point take each other's hands and turn their gaze toward one another, for then the VAT could become four times as high.

Mr. Speaker! When the century's tax reform was implemented in 1991 following an agreement between the Social Democrats and the Liberals, some of the most important underlying motives – not without reason – were to make the tax system fairer, more uniform and more transparent. Part of this tax reform was that the VAT was to cover more goods and services than before and was also made completely uniform. However, this only lasted for one year.

The reason was reported in a government investigation conducted by the Committee for Indirect Taxes, which preceded the introduction of the uniform VAT. Here, it was explained that the harmful effects on the economy of society occur if the VAT is not uniform. Society's resources are utilized less efficiently, consumption and competition among producers are distorted, and the total welfare in the country decreases. Furthermore, the room for lobbying and pressure from different industries and organizations for reduced VAT on their goods or services will increase if deviations are indeed begun to be made. We all know for certain that is what has happened.

Most contemporary politicians say they stand behind the principles that formed the basis for the 1991 tax reform, namely that tax rules should be general and clear without complicated demarcations, and that we should have broad tax bases and tax rates that are well-balanced against the goals of the economic policy. This contributes to a legitimate and fair tax system.

Mr. Speaker! As long as we have this patchwork of a VAT system, I fear that the absurd distinctions that have been discussed today will become more – not fewer. It is a bit like when two siblings argue with each other and one of them tells their father that the other sibling got 20 pieces of candy while the person themselves only got 18. I can, however, have some understanding for this. Why should not dance band performances be allowed reduced VAT when an orchestra has it?

This is something that not only creates more bureaucracy and more complicated conditions but also a misunderstanding of the system. In the long run, it becomes expensive for the entire society.

Value Added Tax

I and the Liberals will continue to nag in order to achieve the broad tax reform that Sweden so badly needs, but if the conditions for this do not improve in the near future, we should at least take action to clean up our current VAT legislation and move towards a more uniform VAT.

I would like to conclude by moving for approval of the committee's proposal.

(Applause)

The deliberation was hereby concluded.

(Decisions were made under § 12.)

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