Response to interpellation 2023/24:82 on harness racing and economic activity
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 Swedish Tax Agency's interpretation of the VAT issue within harness and gallop racing as well as the economic conditions for the horse industry. M argues that the Swedish Tax Agency's assessment is based on EU law interpretations and that the government is facilitating the industry by lowering the tax on gasoline and diesel as well as changing the reduction obligation 1 2 3. M emphasizes that they cannot interpret the legislation as it is the authorities' task 2 3. S argues that the Swedish Tax Agency's interpretation makes it difficult for horse owners to understand the logic since large prize money is distributed 4. S criticizes the increase in the gambling tax which hits the horse industry hard and argues that the interpretation risks creating a black market and reducing the number of competitors 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! Ida Ekeroth Clausson has asked me if I consider that the uncertainty regarding which activities within equestrian sports are subject to VAT warrants a clarification in the laws and if I will do anything else to support the horse industry in order to counter the growth of a black market.
The first question is posed against the background that the Swedish Tax Agency in April 2021 changed its assessment of when someone who conducts activities with competitions within trotting and galloping sports is required to pay VAT. The obligation to pay VAT presupposes that a taxable transaction is made by a taxable person, that is, someone who conducts economic activity.
In its position, the Swedish Tax Agency considers that it is not a matter of economic activity if the activity only consists of participating in competitions against a low entry fee of the kind that exists within the trotting and galloping sports in Sweden. The effect of the Swedish Tax Agency's position is that the horse owner is also not entitled to a deduction for input VAT.
The rules on value-added tax are largely harmonized within the EU. The Swedish value-added tax rules must be compatible with the value-added tax directive. The Swedish Tax Agency's assessment in the position paper is based on the EU law interpretation of, among other things, the concept of economic activity, as appears from judgments from the Court of Justice of the EU. It is the task of the Swedish Tax Agency and the courts to apply the rules in the Value Added Tax Act.
Regarding the interpellator's second question, the government understands that the current economic situation is putting a lot of pressure on many businesses. The government is therefore lowering, among other things, the tax on gasoline and diesel to mitigate high costs for many who are dependent on transport, including the horse industry. I also want to mention that for the most part, all horse betting is conducted with licensed betting companies in Sweden and that the black market for horse betting is limited.
Ida Ekeroth Clausson (S)
Madam Speaker! I thank the Minister for the answer. Unfortunately, I can sense that the Minister for Finance is not so well-versed in either harness racing or the conditions of the horse industry, but in the answer, there is a sentence that encapsulates the problem quite well: "In the position, the Swedish Tax Agency considers that it is not a matter of economic activity if the activity only consists of participating in competitions for a low entry fee of the kind that exists within harness and gallop sports in Sweden."
Madam Speaker! During a year, approximately 8,000 harness racing races are held in Sweden. The first prize can vary from 10,000 kronor up to 4 million kronor in the largest annual races, 5 million in Elitloppet and, next year, 6 million in Åby World Grand Prix, which is decided at Åbytravet in Mölndal.
A total of almost 1 billion kronor is distributed in prize money over a year within Swedish harness racing. There are, of course, several reasons for entering harness racing competitions, for example the excitement and the great prestige of winning the very largest races. But there is certainly not a horse owner who engages in competing with harness horses for the so-called starting fee of 500 kronor, which one might think when reading the Finance Minister's answer. It is also not the Swedish Tax Agency's view that these 500 kronor would be a reason for competing with harness horses.
The fundamental problem here is rather an EU ruling that athletes who have prize money as their only income cannot be considered to be conducting economic activity. The so-called starting money was introduced within harness racing to circumvent this by providing an income that is not performance-based. But it has, therefore, not changed the Swedish Tax Agency's interpretation.
Madam Speaker! I want to ask the Minister if she now, with knowledge of the large sums that are distributed in prize money every year within harness racing in Sweden, understands that it becomes very difficult for horse owners to understand the logic in that it would not be an economic activity that they engage in.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I thank the interpellor Ida Ekeroth Clausson for the question. There are two parts to this very important issue. One naturally concerns the Swedish Tax Agency's assessment, and the other concerns the general pressure and the situation in the industry.
To step back a little, I understand that the equestrian industry is large and important for Sweden with many people involved. And the harness racing sport is an industry and a business that has truly worked hard to professionalize itself and has worked in a professional manner. I can only emphasize this.
When it comes to precisely this interpretation of the legislation, which I understand the interpellator would like me to give my view on here, it is not I who shall interpret the legislation. No matter how much one would like it, I as the person responsible for taxes cannot make an interpretation, because it is not I but the authorities who do so.
However, if I understand the matter correctly, one or more court reviews of this issue are now being conducted. And it will be interesting to see the outcome of them.
The second part is about what we do more to facilitate for this industry but also for other industries. It is still the case that one should not underestimate, whether it is a large company that has many horses or if it is a smaller company – often one is integrated in different ways in this sport – that it is very much about transport. Together with the coalition partners, we are lowering the tax next year on both petrol and diesel. We are changing the reduction obligation. This will affect many in this industry in a positive way. I do not see that just this type of proposal exists among the Social Democrats. But I believe and think it is important to emphasize that it will facilitate economically for this industry.
Ida Ekeroth Clausson (S)
Madam Speaker! It will be interesting to see what happens regarding judgments and appeals and also regarding the preliminary notice from the Tax Court Board that is being awaited.
I noted that the Minister in the interpellation response answered a question that I have not asked, namely regarding the gambling market and the risk of illegal gambling. The risk that the main organization for harness racing, Svensk Travsport, highlights as a consequence of the new interpretation of what constitutes economic activity is, of course, not about betting, but about the risk that dishonest people will find various ways to reduce the costs of their horse ownership by bypassing tax legislation.
Madam Speaker! It is clear that the Minister for Finance does not intend to take any support measures specifically aimed at the horse industry. In one way, it is fully understandable when so many industries suffer in difficult economic times.
The Minister for Finance has said that it is only lazy governments that have to raise taxes. I can state that an increase in the gambling tax from 18 percent to 22 percent, as announced in the budget bill, will hit the horse industry hard as the gambling company ATG's revenues are estimated to decrease by 200 million kronor per year. ATG's surplus does not only go to trotting and galloping sports, but it strengthens the entire horse industry, including the 450 riding schools located all around Sweden.
Madam Speaker! That Svensk Travsport itself sees a risk that a black market could emerge should be a warning signal. And the interpretation of the VAT issue itself results in both fewer people paying value-added tax and fewer people engaging in competing with harness racing horses, because the economic conditions become worse. All of this in combination means that the state loses out on revenue. This, if nothing else, should worry a Finance Minister. Regardless of whether the Finance Minister does not agree with me on the horse industry's great importance, perhaps she can agree that we should safeguard the state's revenue.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I must apologize if I misinterpreted the interpellation when I answered a question that was not asked. I thought it was somewhat implicitly asked. But sometimes it is better to have more answers than too few, so to speak. It is not always that one is accused of giving too many answers.
I will be very brief. What we are doing for this industry now, as I mentioned earlier, is among other things that we are lowering the fuel prices and that the reduction obligation will change dramatically from January 1st. It will have an impact. If one, for example, runs a horse transport 30 miles a week, it means, both this year and next year, 3,000 kronor in diesel tax reduction. In addition, the change in the reduction obligation will certainly amount to about 10,000 kronor. Of course, it matters. One cannot escape that.
As far as I know, the Social Democrats do not have this type of proposal for the horse industry. I have also noted that the Social Democrats support the increase in the gambling tax that we have submitted proposals for to the Riksdag.
I would like to conclude with something general about prioritizing. When I say that lazy governments only raise taxes, it is because that is what has happened. Previous governments have never succeeded in prioritizing, saying no to things, and making difficult trade-offs.
That we are lowering taxes in this government, I have perceived that many in here think we are doing to a very high degree. There are taxes here that can be raised. I previously had, for example, a debate about raising the tax on cigarettes and lowering it on snus. I think that is a very valid and quite pragmatic starting point.
With this said: I naturally follow, and will continue to follow, what happens in the industry. I will continue to follow what happens in the courts, quite simply. As I said earlier, I cannot make an interpretation of the legislation. But this is a very important industry. The horse industry as a whole has a very great significance for Sweden. It is about money, about leisure interests, about commitment, about jobs and about very many different things. Therefore, I will naturally follow this issue and will surely have reason to return here in the chamber as well because there is a great interest in the issue.
Ida Ekeroth Clausson (S)
Madam Speaker! The horse industry generates 38,000 jobs, gives many children and young people a meaningful leisure time and contributes to the open landscape all around Sweden. But the industry also faces major economic challenges that have persisted for a long time during the current recession.
Within trotting, the number of horses born during a year has almost halved over more than 20 years, even though gambling via ATG has increased significantly during the same period. The trend is that horse owners with large economic resources and trainers with large movements are taking over increasingly at the expense of the popular movement. Events such as the Swedish Tax Agency's interpretation of the VAT issue and the increased gambling tax risk making it so that even fewer will be able to make a living within horse sports and have horses as a hobby in the future.
I thank the Minister for Finance for coming and answering this interpellation. I hope it is true that she sees the importance of the horse industry and what it means for the Swedish countryside and that we truly follow up on what happens in this matter.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I thank you for the applause! No, I'm joking – I thank you for the debate.
As I mentioned, we will certainly return to the issue in different ways. I have nothing more to add at this moment.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.