Response to interpellation 2022/23:302 on an adjusted tax rate for small businesses
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
The debate concerns tax conditions for small-scale companies and the principle of taxation according to ability to pay. M argues that it is important to create incentives for entrepreneurs to promote growth and prosperity 1 2 3. The Government wants to facilitate things for companies and has removed the mandate to increase the tax rate for dividends and capital gains 1 2. M emphasizes that the balance between entrepreneurship and preventing income conversion must be preserved 2 3. S argues that the difference between an employee and a small-scale company owner is increasing, which jeopardizes the legitimacy of the tax system 4 5. S emphasizes the importance of taxation according to ability to pay and fairness in the tax system 4 5 6.
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 Speaker! Hanna Westerén has asked me whether I consider that the legitimacy of the tax system is maintained when the difference between employees and entrepreneurs increases at the employees' expense and, if not, what measures I intend to take. Furthermore, Hanna Westerén wonders whether I consider an adjusted tax rate to be excluded in the case of small companies and, in that case, how I intend to promote the principle of tax according to ability to pay. The question is posed against the background that the government has made decisions on additional directives to the committee that has been tasked with submitting proposals for simplifications of the so-called 3:12 rules.
The special rules for distribution and capital gains on shares in small companies, the so-called 3:12 rules, are of great importance for starting, operating and developing companies. Successful entrepreneurship creates jobs and growth and is therefore a prerequisite for prosperity in society. However, establishing and operating companies involves an economic risk. In order for more people to take this risk, it is important to create incentives for entrepreneurs to start and operate companies. The Government has therefore decided on additional directives to the committee, which mean that it shall review the 3:12 rules in order to further promote entrepreneurship.
The committee was tasked by the previous government to specifically consider whether an adjusted tax rate on dividends and capital gains to be included in the capital income category could increase the scope for simplifications. Adjusted tax rate in this context shall be understood to be interpreted as an increased tax rate. The Social Democrats have also previously attempted to raise this tax rate, but were stopped by the Riksdag. The government has now removed that mandate for the committee. It needs to become more profitable to run companies, not less.
It is important that taxes are collected in an efficient manner and that the 3:12 rules do not open up for such income conversion as the rules are intended to prevent. It is part of the committee's mandate to consider this.
Hanna Westerén (S)
Madam Speaker! Thank you for the answer, Minister for Finance Elisabeth Svantesson!
I want to begin by stating that there is a significant difference in tax conditions between employees and sole traders. I touch upon the risk incentive myself in my interpellation. But I still think as a social democrat that there must be some form of proportionality and perhaps a limit somewhere.
I do not quite know where that line is drawn for the Minister for Finance, and it was also not my question in the original interpellation. But it is clear today in Sweden that the difference between employee and sole trader is increasing. At least I see obvious risks in that, not least for the continued legitimacy of our tax system.
I want to return, Madam Speaker, to the principle of taxation according to ability to pay. It is a principle that has enabled redistribution where it has been possible. It has contributed significantly to precisely the legitimacy.
The principle of taxation according to ability to pay is, however, increasingly being undermined. I wonder, given the signals from Finance Minister Elisabeth Svantesson, if it is even a principle that she stands behind and considers worthy of protection. I also wonder if Finance Minister Elisabeth Svantesson sees any actual problems in what I describe in the interpellation.
It is about performing the same work, in the same healthcare department, under radically different tax conditions. Can that phenomenon not jeopardize legitimacy? Can that phenomenon, in the long run, not jeopardize welfare in more than one way?
Finansministern Elisabeth Svantesson (M)
Madam President! Thank you, the interpellator Hanna Westerén, for the questions!
This is an important issue in many ways. But I think we might think it is important in slightly different ways.
I wish we had a day when the Social Democrats thought it was good and felt joy in lowering taxes for ordinary wage earners. I want to start there. It would be a joy for many of the country's wage earners. This applies especially in a situation with high inflation where real wages are falling.
The Tidö Agreement will lower the tax on earned income and pension. It is an important announcement for everyone who is currently hit hard by inflation and does not have different types of compensation for exactly this.
When it comes to the discussion on 3:12 rules and small-scale companies, it is very important for us, if we are to secure the welfare, which I also received a question about, that we get a stronger entrepreneurship climate. We must get more companies that both start and grow. That gives us the welfare of the future.
That is also why the government has presented a supplementary directive to the investigation. We want to facilitate and not complicate things for more companies in Sweden. That is the basis.
At the same time, it is obvious that the work involves the balancing act that is already present in the 3:12 rules regarding income conversion. There must be a balance between entrepreneurship and preventing income conversion. That remains fundamentally in place.
We do not want the 3:12 rules to become more difficult. We do not want the capital tax regarding the 3:12 rules to increase. We know that it leads to fewer people starting companies. Consequently, this leads in the long run to fewer revenues for the state, municipalities, and regions, because we have fewer people who run and start companies. That more people do it is what secures the future's welfare.
Hanna Westerén (S)
Madam President! I hear Finance Minister Elisabeth Svantesson speaking boldly and cheerfully about how ordinary wage earners shall enjoy more tax cuts. We can gladly discuss that in another context. Now we are discussing partly other issues.
The Minister for Finance speaks of a stronger enterprise. I want us also to speak about a stronger tax system for the immense challenges we face.
It is a bit tricky that the Finance Minister is trying to smear us Social Democrats as an imminent danger to the companies. I mean that a danger for all of us, including the small-scale companies, is a tax system that loses its legitimacy. The danger is a hollowed-out principle of taxation according to ability to pay. It is a danger for all of us and also for the small-scale companies.
Everyone who lives and works in Sweden benefits from cohesion, from order and regularity, and from a fair and transparent tax system. That is my absolute conviction.
Madam President! I also want to remind of the purpose of the rules for small companies. It is to prevent that higher-taxed earned income is converted into lower-taxed capital income. Is that still the purpose of the so-called 3:12 rules, or has the purpose gradually changed?
According to Finance Minister Elisabeth Svantesson, the conditions for small-scale companies shall be improved and simplified. The committee investigating the conditions for small-scale companies shall take into account that it is not to be opened for income conversion which the rules are intended to prevent.
What does that mean, in concrete terms? Attractiveness is to increase, but income conversion is to be made more difficult. What applies? Is it nevertheless the case that the difference in conditions between the self-employed and the region-employed nurse will increase even further during Finance Minister Elisabeth Svantesson's shift?
Finansministern Elisabeth Svantesson (M)
Madam President! I am married to a nurse. I have full insight and awareness of approximately what the salary level is for nurses a bit around the country, for example in Örebro.
Let me be very clear. Sweden has now for a long time had a growth per person that has been too low. The government focuses on solving problems here and now but also on looking at what Sweden should be in 10, 15, or 20 years.
How is Sweden to have stronger prosperity? How can we be even more competitive? That is what it is about when we have given a supplementary directive to the investigation on 3:12 rules. We know that successful entrepreneurship contributes to jobs, growth and prosperity. That is the entire purpose of the supplementary directive.
As I said, it is still a matter of the committee finding the balance. There is a need to promote entrepreneurship while the purpose of the rules, to prevent income conversion, remains fixed.
With that, I feel, Madam Speaker, that I have answered this question and I hope, of course, that the Social Democrats also want to lower taxes for people who work, even if the interpellation is not only about that.
Hanna Westerén (S)
Madam Speaker! I do not intend to speak about my marital circumstances, but I can congratulate Elisabeth Svantesson on the fact that she, hopefully, is happily married.
I conclude by thanking you for another debate. There were one or two answers but actually far more questions, for my part, and also a genuine concern for our Sweden. It has been made clear here today that there probably will not be any talk of an adjusted tax rate for small businesses. Nevertheless, my wonder remains.
The legitimacy of the Swedish tax system is upheld by the principle of taxation according to ability to pay - that we proportionally forgo a fraction of our income to finance our common systems - and by the fact that the tax system is perceived as fair and transparent by the absolute majority. If the rules for small businesses are not to be tools for both promoting attractiveness in entrepreneurship and generating tax according to ability to pay, I wonder what aces Finance Minister Elisabeth Svantesson has up her sleeve to secure precisely legitimacy and the principle of taxation according to ability to pay.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.