Response to interpellation 2022/23:276 on a modernized withholding tax on dividends
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
The debate concerns the modernization of the Swedish withholding tax on dividends, which is outdated. S believes that the government should present a proposal now to counter tax evasion and adapt the law to digitalization, despite ongoing work in the EU. S argues that the government is not delivering results and that it is possible to act now 1. M argues that it is unnecessary to enact a separate law that would later have to be changed following the commission's proposal 2. M emphasizes that they are waiting for the EU's common system to obtain correct legislation 2 3. M claims that they are working hard on information exchange in the EU to counter tax evasion 3.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Finansministern Elisabeth Svantesson (M)
Madam President! [The member] has asked me what in the European Commission's work limits Sweden from introducing a new modernized law on withholding tax on dividends and if I am taking any initiatives to influence the Commission's proposal. Furthermore, Niklas Karlsson asks when the government intends to present a proposal on a modernized withholding tax to the Riksdag.
A special investigator submitted a proposal during 2020 for a new system for withholding tax on dividends to foreign persons. The referral bodies had many views on the proposal, and the Ministry of Finance referred a draft for a Council on Legislation referral last year. The referral bodies have, however, had extensive views also on parts of this proposal. These views are now being analyzed within the Government Offices.
At the same time, work is ongoing within the European Commission to develop an EU-wide system for the management of withholding tax. The Commission has indicated that it plans to submit a legislative proposal during 2023. Before we know how the Commission's proposal will ultimately be designed, it is too early to say what concrete impact the proposal will have on the new law on withholding tax and at what point it can be presented to the Riksdag.
Niklas Karlsson (S)
Madam Speaker! Thank you for the answer, Minister for Finance! It took a little while, but I am glad it finally came and hope that it was a one-time occurrence.
One might wonder what source tax or coupon tax is. We who work with tax policy daily are familiar with all kinds of different taxes, with what exists, how it should be formulated, and how it is then to be attempted to be applied. The person who is now sitting at home in front of the TV watching the debate is only interested in that it is simple, clear, and transparent. It should not be any trouble, but it should work quite simply.
There are certainly many who are not quite clear on what coupon tax actually is - coupon or withholding tax. On the Swedish Tax Agency's website, it says: "Coupon tax is a withholding tax levied on dividends from Swedish limited companies when the person receiving the dividend resides abroad or is domiciled abroad." That probably brings some better clarity to what it is about. But I will make it very simple; withholding tax or coupon tax is about preventing tax evasion and errors.
We have had this debate, not least I and the Minister for Finance, in the chamber before. It has been about so-called exit tax, when one moves one's assets out of the country, engages in tax planning and tries to avoid paying Swedish tax. This follows the same track.
It is about preventing tax evasion and avoiding errors. That is why the previous government has tried to modernize the coupon tax law that Sweden has had since 1971 and which is outdated in almost every respect. It came into existence in a time when society looked completely different than it does today. Now we are digitized. That thing with coupon tax, where the coupons were stamped, does not exist. It is completely different today than it was more than 50 years ago.
The referral to the Council on Legislation that the Social Democratic government submitted concerned four things. It concerned adapting the legislation to what applies regarding income tax in general. That is not the case today. It concerned that the effects of internationalization and digitalization on the financial markets should be taken into account, that is, that the law is modern, purposeful, and timely. It concerned that the administrative costs are kept as low as possible. And it concerned that it is designed so that the risks of error and fraud are minimized.
The Finance Minister has chosen to put the referral to the Council on Legislation on ice, with reference to the fact that work is being carried out within the European Union. I think that is a weak argument. It is insufficient. I mean that the Swedish government could already now put forward a proposal for a government bill to modernize the law on withholding tax and in the future take into account what happens in the European Union. Finland has done that. Sweden could also do that.
When I try to bring clarity to how the matter looks in the European Union, I read both the parliament's report and the document that the commission has prepared. It is possible that I have missed something, that I do not have a full grasp of the situation. But in that case, I would like the Finance Minister to inform me about it.
What in the Commission and the Union is it that prevents us from moving forward a bit faster and modernizing the Swedish law on withholding tax?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Thank you for the interpellation, Niklas Karlsson!
I will keep it brief. I fundamentally agree with Niklas Karlsson and the previous government that this legislation must be updated. It is from the 70s. It goes without saying that a lot has happened in this area since then.
Just as Niklas Karlsson knows, both the previous referral to the Council on Legislation and the investigation have received a considerable amount of criticism. That in itself is not a problem. That can be worked on. But our assessment is that the commission will already in July come forward with a proposal for common legislation on the withholding tax area. I think – and I actually believe the Social Democrats also think – that it is quite unnecessary to now move forward with its own legislation if it then has to be redone and recast again after the commission's proposal or the proposal that is to be discussed at the EU level.
It is always a shame when things drag on. This issue has been dealt with by previous governments over a long and protracted period. But it is better that we get correct and proper legislation in place than that we first work out our own and then have to adapt it again. That is the simple and very true answer.
I completely agree that the legislation must be modernized. It must be updated. But let us do it in the way that we in the EU will agree upon together.
Niklas Karlsson (S)
Madam Speaker and the Minister for Finance! One can say that in the view on the right to tax, there is a Swedish perception in relation to our friends in Europe, especially when it concerns the European Commission and the cooperation we have in the EU. It is that the right to tax is national, that it is a national matter. There we differ from our party friends in many other countries. It is a Swedish perception. I am glad about that. It is important that we maintain it and work together so that precisely the taxation shall be a national matter.
Sometimes we come to issues where there is an interest in having common standards. We have the old BEPS project. And the OECD is working on us setting minimum standards together to avoid a race to the bottom, i.e., that countries compete through low-tax opportunities. Then the European Union can function as an instrument by us having common foundations, which we are not to fall below. We have seen that in the corporate tax area, and similar reasoning is applied in other areas.
My point, however, is that such a fundamental base cannot reasonably become an obstacle for Sweden to choose how we ourselves set the tax. That conflict only arises if we were to have a lower tax or a view that the tax extraction should not be as high as the base plate that the union would choose to set. At least I do not foresee that the EU would be more radical or progressive and set a higher level than we would have in our proposals.
Regarding the proposal that the Social Democratic government delivered, I can bet quite a lot that the EU would not put forward a proposal for a higher tax rate than the one we proposed in the referral to the Council of Legislation.
I will not become too conspiratorial, but I have said it before and I say it again, Madam President: It is easy to get the impression that the Finance Minister and the government do not want to find reasonable tax bases and that one does not view the fight against tax evasion, tax errors, and tax avoidance in the same way as the Social Democrats.
The Minister for Finance has on several occasions said that they share our view. But then one must start delivering results. One cannot put on hold investigations into, for example, exit tax to prevent tax planning and tax evasion. One cannot change the directives in investigations regarding, for example, holding companies where one simply lowers the tax rather than raising it. And one cannot avoid moving forward with proposals for a new, modernized withholding tax by referring to the fact that the work is already ongoing in the EU.
To make this discussion not only politically pointed but also politically intellectual, I want to say that I still lack answers as to what it is in the work of the European Union that prevents the government from presenting a proposal already, other than that it would be foolish for practical reasons because it would then need to be updated.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Let me begin by telling the members of the House and those watching and listening to this that during the spring, Sweden is the chair of the EU, and one of the issues that I and the Swedish presidency have worked hard to get through is DAC 8. It is an abbreviation that very few know what it means, but it concerns cooperation and exchange of information within the EU to prevent tax evasion, tax avoidance and other such things. We have worked hard on this.
It doesn't matter how often Niklas Karlsson stands in the chamber and talks about how the government is not working on these issues. For me, they are incredibly important. That is also why I have driven these negotiations and brought them to fruition. The result will be an important tool for exactly what Niklas Karlsson spoke about.
I share the view that this law needs to be modernized, but as the EU and the Commission are now working on the system and there is communication between the countries, and of course also with the Commission, I see very little reason to present legislation that we might then have to adjust. We do not know exactly what this system will look like or what the Commission will present.
I don't actually think that the Social Democrats either think it would be a wise idea. Had the government presented it, we would probably have received criticism for not waiting for the EU. I see this more as a reason to highlight issues where, in this case, Niklas Karlsson wants to try to paint a picture that the government and I as Finance Minister are not working on issues regarding tax evasion and tax avoidance. But these are very important issues, because our common welfare shall be paid for by everyone who is to pay tax. No one should be able to withdraw.
Madam President! We are therefore awaiting the EU, and we believe the decision will come in July. It is no more complicated than that.
Niklas Karlsson (S)
Madam President! I am not out to paint any picture of the government, for the government does that quite well itself. It will be difficult to disprove what has just been said. It is certainly very good that the government also, during its presidency of the European Union, is driving issues such as DAC 8. No one is against it – on the contrary. It is very good. The problem is only that it is insufficient. More should be done, and more can be done if one wants to.
During the time, we live with legislation that has more than 50 years on its back and which should have been updated long ago. Other countries in our global environment have chosen to do so, despite the work being done in the European Union.
I am still of the opinion, when I hear the Minister for Finance and when I read the documents from the commission and from the parliament, that there are every possibility for the Swedish government to table a proposition before the Riksdag, do something about this already now and then make adjustments in the future if the need should arise. It is also the case that during this time we are bleeding. Tax revenues are being lost. We live with an old-fashioned, obsolete, outmoded legislation that needs to be updated, and that can be done if one simply wants to.
Madam President! I am not trying to paint any picture of the government, for the government does that quite well itself.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Yes, Niklas Karlsson is trying to paint a picture. I remember the previous interpellation debate when Niklas Karlsson said that there is a difference between M and S, for example, in the view on the value of people. Then he really tried to paint a picture!
The government is pursuing a policy and has received the confidence of the voters to change direction. Many of the things that are going in the wrong direction are to be set right. It is about serious crime. It is about the energy system. It is about the fact that far too many people stand outside the labor market and need to get in. But it is also about tax issues. Taxes shall function effectively and be collected in the right way, and people shall not withdraw.
Madam President! It speaks for itself that we have worked hard on this in the EU during the spring because we know that we must together have a better system with information exchange and other measures so that companies and individuals cannot engage in tax evasion.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.