Response to interpellation 2022/23:86 on high VAT on repairs

Finansministern Elisabeth Svantesson (M)

Mr. Speaker! Ida Ekeroth Clausson has asked me whether the proposal for a higher value-added tax on certain repairs will affect the transition to the circular and the will to reuse products, in what way I and the government will ensure that the transition to a more circular economy does not suffer, and if there are plans to further increase the value-added tax on goods and services.

Sweden is in a challenging economic environment with high inflation. The government's budget bill for 2023 is therefore weakly restrictive. There was also a need for increased funds for, among other things, the defense and the police. The government therefore chose not to prioritize maintaining the reduction of the value-added tax on repairs.

Sweden shall pursue an effective and ambitious climate and environmental policy. The Government works to ensure that the policy in these areas is long-term sustainable and cost-effective. Value-added tax is, however, fundamentally a fiscal tax, and using value-added tax as a steering tool to achieve a certain goal, such as the transition to a more circular economy, goes against the primary purpose of value-added tax. Furthermore, the Government's assessment is that the proposal for increased value-added tax on certain repairs has small effects on the transition to a more circular economy.

The previous government appointed the inquiry Economic steering measures to promote the transition to a circular economy (dir. 2022:67). That assignment includes proposing steering measures other than value-added tax to promote the transition to a circular economy. That inquiry continues its work also under the current government. I do not want to anticipate the inquiry's conclusions.

The Government has no proposals for further increases of the value-added tax on goods or services.

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Ida Ekeroth Clausson (S)

Mr. Speaker! I thank the Minister for Finance for the answer. There is no doubt that Sweden is in a challenging economic situation, and that the government in that situation wants to strengthen the treasury is not much to say - especially not when the increased revenues are to go to the police and the defense, according to the Minister's answer.

But according to the government's own calculations, the increased value-added tax on certain repairs means that the treasury is strengthened by up to 60 million kronor this year. It is, of course, not small change, but in relation to the entire budget, the sum is almost vanishingly small, especially when one considers that the government has lowered the tax for us high-income earners and thereby is calculated to lose 13 billion kronor this year. It is thus over 200 times more than the revenue increase that is calculated to come from the increase in the value-added tax on repairs.

The Minister for Finance states in his response that the government does not have further proposals regarding changes to value-added taxes on goods and services, despite the fact that they themselves write in the bill that the starting point should be a uniform value-added tax and the application of the standard tax rate of 25 percent.

Only a single tax is to be raised, according to the Minister for Finance, and in that case, the government chooses to push through a tax increase which, according to the bill, will lead to poorer resource management and to an increase in the environmental impact from new production. It is truly a remarkable prioritization by the government that the only VAT increase proposed yields relatively small revenues and, according to both the government and several referral bodies, will have a negative impact on the environment. For me, this is a clear signal of how highly, or rather lowly, the government prioritizes the environment. It becomes even more remarkable in light of the fact that the Riksdag, less than a year ago, was in agreement to lower the tax in question to 6 percent.

Can the Minister for Finance explain what has happened since May last year, which has led to this totally opposite assessment?

I also want to ask the Minister for Finance how she views the small business owners who now risk having smaller margins when more people choose to buy new goods instead of repairing old ones. Increased tax on repairs risks hitting the number of jobs just as we enter a recession, and there are also fears of a loss of skills that rather need to increase if we are to achieve trade with better sustainability.

The Moderates and other parties in the government and the government base usually say they stand up for small business owners. Does the Finance Minister consider that they are living up to this through this tax increase?

(Applause)

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Finansministern Elisabeth Svantesson (M)

Mr. Speaker! Many thanks, Member, for the interpellation and for the wise questions! It is well to step back a little. The VAT on repairs in general is 25 percent, but on just these specific parts, it has for a long time - since 2017, if I am not mistaken - been 12 percent. Then it was lowered further, to 6 percent.

One can absolutely reason about whether it is precisely this reduction that decides the future of this sector. I do not think so. If the government were to make that assessment, we would of course not have changed the VAT rate from 6 to 12 percent. Let me also just say that 12 percent is a reduced VAT in relation to the VAT on all other repairs, which is 25 percent. This is important to note.

I completely share the interpellator's view that the circular economy is important and is becoming increasingly important. It becomes important for Swedish consumers in many ways. Many in Sweden are struggling with high prices right now, but above all, it is the case that we want to transition. We want to reuse and ensure that our clothes can be used by more people. New stores and new opportunities are emerging in many areas, and that is fundamentally very good.

But I definitely do not make the assessment that this VAT change would decide this entire issue. One can imagine that, for example, a bicycle repair for 300 kronor will cost approximately 315 kronor with this change.

When it comes to the question of why just this prioritization is so important, I want to say, as I have said many times before, even before I sat in government, that lazy governments would rather raise taxes than prioritize - it is easy. One might think that we are now both raising taxes and prioritizing, but in this case, it is completely correct. This change is important because it is about prioritizing where we should have our resources. It is about how we are to get money for the defense, the police, and other things that are very important to us.

This is, therefore, one of the few tax increases that this government is presenting. We are presenting tax cuts of 10 billion to make life easier for people in their everyday lives and to ensure that more people work.

The most important part of the budget naturally concerns prioritizing the right things and ensuring that more people work. That is why we are lowering the tax for those over 65 – so that more people can work so that we receive more money for welfare and other things.

But the government and I do not make the assessment that just this tax would be a problem for the entire sector or for the circular economy.

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Ida Ekeroth Clausson (S)

Mr. Speaker! I thank the Minister for Finance again for the answer. We all have a campaign in fresh memory – a campaign where the Moderates promised not to raise any taxes during the mandate period we are now in. But once again, the government has said one thing before the election and another thing after the election. We see that the broken promises are beginning to become many now.

When the then Social Democratic government presented a proposal for a defense tax to finance the expansion of the defense, Elisabeth Svantesson's comment was as follows, which she herself had just read out: "It is only lazy governments that have to raise taxes, because they are unable to prioritize."

Now, almost exactly half a year later, Svantesson is Finance Minister and is standing and defending a tax increase that partly aims to finance precisely the defense, even though the revenue increase in this case would not be enough for more than one-hundredth of a submarine and would cover less than half a percent of the loss of revenue that the tax cut for high-income earners entails. Whether the government is lazy, I do not know, but it is truly a total change in the argumentation that has occurred since election day.

The Minister for Finance says that there are no proposals for further tax increases but does not seem to completely rule it out. As stated, the government writes in the bill that the starting point should be a uniform VAT of 25 percent. To me, it sounds like pointing out a future direction where more value-added taxes may come to be raised. Can the Minister for Finance give a clearer statement on how she views the levels—is the Minister for Finance's intention that the VAT should always be 25 percent, and will the government take more steps in that direction? On which goods, services, and products can the voters, in that case, expect higher prices?

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Finansministern Elisabeth Svantesson (M)

Mr. Speaker! Thank you, member, for the questions! This government and its coalition partner Sverigedemokraterna have made major changes in the budget regarding the direction for Sweden. We realigned the policy. We are ending inefficient measures, for example the climate bonus which now only costs enormous resources while we still saw a fantastic development in the electric car market. That really pleases me. We also see now that Tesla is starting to lower prices without the bonus. That is good.

We restructured the policy regarding investment support in order to be able to use those funds for defense, the police, and welfare. We made several other changes. For example, I mentioned the travel deduction in the debate just now. Resources are needed in other places. That is my basic attitude toward priorities.

My experience of Social Democratic governments is that they have been unable to prioritize among expenditures but have gladly raised all taxes. This government is not raising all taxes. What we are now discussing concerns a small change in the VAT on specific repairs. But we are lowering the tax for pensioners who work. We are lowering the tax on fuels to make things easier for people. And we are doing what we said when we prioritize police, the justice system, and welfare.

These are important announcements. At the same time, as I said in the response, it is a special economic time. We must not fuel inflation. For that very reason, it has been important for me as Finance Minister to ensure that the budget we have presented is restrained and wise and prioritizes the most important things. Then the members can be completely calm and secure that the four coalition parties in the Tidö Agreement during the coming years will continue to work on facilitating for people to get into work and facilitating for entrepreneurs to grow.

We will continue to facilitate growth in Sweden, quite simply. This is what was needed - not increased taxes.

We can take the discussion on defense as a typical example. There, the Social Democrats want to once again raise a tax in order to be able to finance perhaps the most fundamental function a state has, namely to protect the population.

No, we are therefore not going to pursue a high-tax policy. We will receive criticism from the Social Democrats for choosing not to do so. We will continue to facilitate things for people and companies. But just this VAT change, which only applied for a short period, we think is reasonable. In the circular economy, we think it is reasonable to have reduced VAT on these repairs and that it should be 12 percent instead of 25 percent as in all other parts of the repair industry. The VAT is thus lowered in relation to the level that is normal.

Finally: We have no proposals for changes to the VAT. Just as I know the Social Democrats also think, we believe we can have a discussion on what the future's VAT should look like. Is it reasonable with three levels, and should they look like they do today or should they be more uniform?

In this case, I think it is reasonable that the VAT on these services is somewhat more uniform in relation to other repairs that are also important for the circular economy.

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Ida Ekeroth Clausson (S)

Mr. Speaker! The Minister for Finance contradicts herself when she first says in her response that the tax increase, which amounts to 60 million this year, will go to the police and the defense - we both know that the money will just not be enough for anything at all when it comes to the defense - and then criticizes us for having a thought about how we can afford the defense. We both know that the defense needs to be strengthened.

I am also not reassured by the Finance Minister's answer when she speaks about the environment and household finances. I am still concerned about how the government prioritizes the environment and household finances. We are in a climate crisis, and the economic clouds of worry are accumulating. Is it really the time to make it more expensive for small business owners who repair items and thereby reduce environmental impact when older goods can get a new life?

We also know that more households are struggling to make ends meet with increased costs. One can then ask if it is really the right time to make repairs more expensive.

But above all, I note that my second question in the interpellation still has not been answered. In what way do the Minister and the Government intend to ensure that the transition to a more circular economy does not suffer? The Minister for Finance refers here to an investigation that the previous Social Democratic government decided on. That the investigation continues is obviously positive, but surely the Swedish government should be able to present some of its own thoughts on how the necessary transition should be carried out?

(Applause)

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Finansministern Elisabeth Svantesson (M)

Mr. Speaker! I do not need to receive applause before I begin to speak.

Thank you, Mr. Chairman, for the wise questions! I will answer them clearly.

Is it the VAT change from 6 to 12 percent that will determine the circular economy or the situation of small businesses? No. It is an important part for financing. We only gave examples. In our budget, one can see that there are many things that we prioritize and finance in different ways.

But let me go back to the small businesses. I do not know which small business owners Ida Ekeroth Clausson has spoken with. But when I meet small business owners, I tell them that the opposition and the Socialdemokrater want to continue to increase the reduction obligation so that it becomes more expensive to use the car, do not want to lower the tax on fuels, and do not seriously want to tackle the issue of the energy system so that we can bring down the prices. One of the reasons for the high energy prices is, of course, the war in Ukraine, but another reason is decommissioned nuclear power.

What we are debating now is perhaps not the issue that small business owners all over Sweden discuss the most, but it certainly affects them, even if it is marginal. Changing bicycle tires may have cost 300 kronor, and now it may cost 315. But it will not be decisive for the industry. The reduced VAT has been maintained. This is important to emphasize.

I believe that many of Sweden's small business owners are happy that we have received a new government that puts companies high on the agenda and sees what the major problems are for companies in different industries. These are tough times for companies in many industries. We will continue to facilitate things for them in various ways.

When it comes to the transition to a circular economy, I think it was very good that the previous government appointed the inquiry that we have spoken about. It is an important inquiry. Much work is ongoing in many places. Consumers are making active choices. Many companies are making active choices, so that the transition can go faster and we can reduce our emissions.

I look forward to further discussions on just this question, but now my speaking time is over.

The interpellations debate was hereby concluded.

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