Response to interpellation 2024/25:155 on a clear and simple tax system
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
M considers that Sweden has a well-functioning tax system and does not see a need for a major tax reform. M advocates for smaller reforms to lower taxes on work, investments, and savings as well as simplify rules for entrepreneurs 1. M argues that they are already implementing these changes to increase growth 1 2 and are taking steps to make Sweden wealthier 3. S considers that today's system suffers from a fiscal imbalance between work and capital and demands a major, comprehensive tax reform 4. S argues that the tax system should be simple, neutral, and based on ability to pay 4. S argues that the government is increasing the exemptions 5. S considers that poverty cannot be rationalized away with tax cuts.
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)
Mr. Speaker! Niklas Karlsson has asked me how I view the need for a new tax reform, how I view the conditions for such a reform, and whether I am prepared to take the initiative to begin a review of the entire tax system.
The tax reform that was implemented in the early 90s was important for the Swedish economy. By lowering the tax on labor, simplifying capital taxation, and making the taxation more uniform, Sweden's competitiveness increased. It contributed to entrepreneurship, innovation, and growth, which has made Sweden wealthier.
Sweden is in a different situation today. Fundamentally, we have a well-functioning tax system, and I therefore do not see a need for a major tax reform at the current time. On the other hand, a series of tax reforms are needed which, within the framework of a responsible fiscal policy, increase the incentives for work, education, business, investments, and entrepreneurship. Reduced tax wedges on work and investments contribute to increased long-term growth that benefits everyone. The government has therefore lowered the tax on work through several reinforced job tax credits. Furthermore, the tax burden needs to continue to decrease in the future.
The government has additionally formulated a number of guidelines for the tax policy of the coming years. These concern a legitimate and fair tax system, good conditions for high employment and growth, effective economic steering instruments, as well as a general and fairly distributed welfare. The tax policy should be designed according to guiding principles concerning sustainable public finances, general, clear and simple rules, a regulatory framework that is compatible with EU law, and taxation in close connection to the time of income.
Niklas Karlsson (S)
Mr. Speaker! Tax systems may sound a bit boring, but it is primarily about ensuring that we have sufficient tax revenues to finance what we define as common affairs, that is, our welfare.
To contribute to legitimacy and justice in the tax system, it is important that the tax rules are general, have broad tax bases, and are uniform. Furthermore, a tax system should preferably have as few special rules and exceptions as possible. If one lives up to these criteria, it means that we contribute to understanding, create legitimacy for such a tax system, and additionally reduce the scope and risks for errors and fraud.
The principles were guiding for the major tax reform that Sweden implemented in the early 90s. They were based on principles and objectives to design a system that was socio-economically and distribution-politically efficient. The core principles were broader tax bases, to create a more neutral and uniform taxation of different incomes, investments, forms of savings, and other parts of private consumption.
It has been some time since the beginning of the 90s. Since the reform was introduced, a large number of deviations have been made from these principles. They have led to the fact that today's tax system is rather characterized by large and serious challenges. All the many deviations from this neutral and uniform taxation have created narrower and more unstable tax bases, which lead to a lack of uniform taxation and to large socio-economic costs by distorting the economic decisions of households and companies.
The most serious problem in today's tax policy is the tax imbalance between work and capital. I mean that Sweden is in need of a large, comprehensive and broad tax reform which must also take place in broad political agreement.
The fundamental pillars for such a review shall be that the tax system shall generate stable tax revenues for the financing of common commitments, be simple for individuals and companies, and furthermore be based on the principle that tax shall be paid according to ability to pay.
Mr. Speaker! Now, it is not that I am alone in this view, but the criticism regarding the many exceptions and that we are not living up to the principles that were guiding for the tax reform in the 90s is extensive. The criticism comes from several sides, not just from Social Democrats or from the political left. It comes from the Expert Group for Studies in Public Economics, where Klas Eklund has written a report. Economics professor Lars Calmfors has spoken about this, LO has spoken about this, the National Audit Office has spoken about this, and the Study Association for Business and Society has spoken about this, and so on. They mean that we are not living up to neutrality and uniformity. Furthermore, we miss out on creating higher growth, better innovation opportunities, stronger entrepreneurship, and stronger justice by continuing to patch and repair and allowing further exceptions in the tax system that we live with today.
Mr. Speaker! The need for a major tax reform is palpable. If it is to succeed, it must happen in negotiations, broadly together with the different parties that exist in Sweden's Riksdag so that we can endure and manage over time. Does the Finance Minister not see this?
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! I also want to thank Niklas Karlsson for this discussion. It is refreshing to lift our gaze and look at the systems that exist. Now, both the Riksdag and the government have a responsibility to review the tax systems, and I therefore truly appreciate the discussion.
The question is raised as often as ever, and I too have thought about it on many occasions. Just as the interpellator said, there are many strong thoughts and opinions that a new major tax reform is needed.
I have nevertheless concluded that when the major tax reform was implemented in the 90s, the situation was different compared to how the situation is today. The tax system at the time was extremely complicated. There were complicated exceptions in the system. Furthermore, the levels were high, and they hindered investments, entrepreneurship, and work. That is not quite the case today.
I can agree with Niklas Karlsson that one can sometimes experience that after the tax reform with the changes that were made, something of a Swiss cheese has emerged, that certain parts of the tax system do not quite hold together. To be honest, I usually think that the Center Party and the Social Democrats have helped each other with this, perhaps mostly the smaller party with many deductions over the years. Many of the rest of us have probably been along on that journey. But certainly, there are gaps.
Why do I not see the need for a large tax reform? First and foremost, I believe that we have different starting points. We have also heard that in an earlier debate today. But I believe that a series of smaller tax reforms is needed.
We need to lower the tax on work, so that those who work get more in their pockets and so that it pays to study. We must continue to simplify the tax system for entrepreneurs, and we shall continue to lower the highest marginal taxes because we want to encourage what I mentioned earlier, namely education and entrepreneurship.
Here we have already delivered, as I have mentioned previously. We have lowered the tax on work in this budget for this year and next year. A family with a police officer and a nurse gets 23,000 more in 2025 compared to 2023. We are lowering the very highest marginal taxes. We are lowering the tax on savings, and we have simplified the tax rules for companies. At the same time, more experts get a tax reduction.
All these tax changes lead to higher growth in both the short and long term - often in the medium and long term. For example, we are now also reviewing the 3:12 rules. It is a matter of a series of smaller tax reforms that I believe are completely necessary for Sweden to become wealthier in the future.
Niklas Karlsson (S)
Mr. Speaker! It is clear that the government, with its current design of the tax policy, contributes to increasing the exemptions rather than maintaining neutrality and uniformity.
The risk with all the exceptions we continue to create is that we lose legitimacy and trust in the tax system. Furthermore, we lose out when it comes to growth-creating measures. We lose innovation and entrepreneurship, and sometimes we perhaps also create greater injustices than necessary.
The Minister for Finance is naturally correct in that regard that it was a different time when the tax reform was carried out in the early 90s. There was a certain degree of transformation pressure, one might call it, which required that the politicians sat down and took a holistic approach to the tax system. It was, in fact, inefficient, complicated, and difficult to understand.
It was good then, but during the years we have lived with the current tax system, the special rules have become more numerous. The exceptions have increased, and we are beginning to experience the same challenges as those we had in the early 90s. That cannot simply be dismissed by saying it was a different time and that it looked different, because it must be added that Sweden was not yet a member of the European Union when the tax reform was implemented in the early 90s. Digitization was in its infancy, and the societal challenges looked completely different than they do today, 30 years later. Nevertheless, the need for a tax reform is still quite pressing. The idea does not only come from the Social Democrats, but it also comes from many other places.
Mr. Speaker! I note that the Moderaterna once, not too long ago, had precisely the same view. It is even the case that Elisabeth Svantesson once, before she became Finance Minister, wrote in Dagens Nyheter together with the current Prime Minister Ulf Kristersson about how pressing the need was for an overall tax reform. Three years later, the Finance Minister's current colleague Niklas Wykman said in an interview with the auditing firm PWC precisely the same thing that Elisabeth Svantesson did in 2019, namely that Moderaterna want a tax reform.
One saw the need, and one thought it was pressing. One saw the opportunity to do something better. But now, when we are two years into the parliamentary term living with a bourgeois government and Elisabeth Svantesson as Finance Minister, the thought is completely gone. It is possible that the answer to the question lies in something that the Finance Minister expressed in the previous interpellation debate, Mr. Speaker. There, she said in a post that she is not guided by any principles.
It is possible that this has been abandoned over the last two years, but the Finance Minister is welcome to explain to the rest of us what it is that has happened. I cannot, however, shake off the feeling that what the Finance Minister is now engaged in is, to some extent, built on some kind of quarrelsome attitude towards the Social Democrats. If I am wrong, I hope the Finance Minister will correct me.
The Minister for Finance is therefore welcome to explain why she has, in such a short time, completely changed her political view regarding the need for a new, comprehensive tax reform.
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! I have definitely not changed my political direction. I had exactly the same political direction when I wrote that article as I have today, namely that we need changes in the tax system to increase entrepreneurship and make it more profitable to work and study.
The point is that it is precisely what we are doing now. That was also what I said at the beginning, in the speech on transparency. I said that I have had different thoughts about this but that it is the needs for changes we see – which we also saw then and which partially remain – that we want to address. We see, in fact, that the tax on labor in Sweden is still high, among the highest in Europe, and we see that we need to do more so that more people will want to run companies and so that companies will stay in Sweden so that the jobs are here.
I am not ashamed, therefore, to say today that I now see the need for fewer tax reforms, because we are doing much of what we wrote about precisely at that time.
One still wonders a bit. I am very transparent when it comes to telling what I think we need to do in the tax system; I am, so to speak, an open book. But what do the Social Democrats want if it were to become a negotiation about a major tax reform?
When one reads both the Social Democrats' and the coalition parties' budget motions, one sees that very much is about increased taxes on both work and savings. Vänsterpartiet wants, for example, to increase the tax on all incomes over 45,000 kronor per month, which we know would mean that many teachers and nurses would have less money in their pockets. When it comes to marginal taxes, which I have heard a lot about in the debates here earlier, there seems to be no openness at all for a reduction of the marginal taxes.
So, one should not lower the tax on work, one should not lower the tax on entrepreneurship, and one should not lower the marginal taxes. I have also read that there is a desire to introduce a mortgage tax.
I am open about what I see we need to do to achieve a wealthier Sweden. My question is what the Socialdemokraterna would want to do in a major tax reform that would create more jobs, increase the motivation for studies, and increase the motivation to work an extra hour?
Niklas Karlsson (S)
Mr. Speaker! I will start with the last point. The principles that should be guiding for a comprehensive tax reform are based on neutrality and simplicity, as well as on fairness and the ability to finance the welfare system.
We succeeded in this at the beginning of the 90s, and we had also done it ten years earlier in the form of another type of tax reform. I am convinced that the prerequisite exists. I am not saying that it will be easy; we will enter with different perspectives, we will have different demands, and we will represent different interests. But it has been done before, and politics should - must - have the ability to do it again. Then it is, of course, about giving and about taking. No, it will not be easy, but yes, it is necessary.
I hear that the Minister for Finance has had different thoughts, but she does not actually answer the question of why one has landed where one has landed just now. I nevertheless look forward to the Minister for Finance being able to return to the views she held some years ago. I also look forward to the Minister for Finance taking the initiative to at least initiate deliberations and soundings regarding the possibility of again carrying out a broad political tax reform.
In conclusion, I would like to address the Minister for Finance, half personally, during this Christmas time. The Minister for Finance is a sympathetic and thoughtful person, and even though we represent different perspectives and sometimes exchange harsh words in the chamber of the Riksdag, I now want to send a small Christmas gospel to the Minister for Finance ahead of the peaceful time that is approaching.
"In a country where Christmas comes with demand letters and joy is only stamped against an invoice, it is easy to confuse wealth with prosperity. For poverty is not a figure that can be rationalized away with tax cuts or market solutions - it is cold nights, empty refrigerators, and children who wish for nothing more than warmth. Security must not become a privilege for the creditworthy. So take this with you: If your heart is an office, let it close for audit and self-reflection! If your calculations are cold, warm them with people's voices - not just with figures!"
Finansministern Elisabeth Svantesson (M)
Mr. Speaker! I will soon also wish Niklas Karlsson a Merry Christmas - completely personally!
First, I just want to say that I am very open. A few years ago, we wrote the article about that we see a need for lower taxes on work, business, and entrepreneurship, and now we are doing step by step what we said. I would have gladly wished for an outstretched hand from Niklas Karlsson and his friends who ruled then if they had wanted to make a major tax reform. But now we are where we are, and we work day by day to make Sweden richer.
Then we leave that part, and I say instead that I truly wish Niklas Karlsson a Merry Christmas. I know that he and everyone in here are fighting for the same thing, namely to make Sweden better. We want to do it for the people, and we do it together with others. We have slightly different starting points sometimes, but fundamentally we are still in agreement on many important issues. When I am out traveling the world, I am proud of that, and I say that from the bottom of my heart. It is about Ukraine, about defense, and about us having a strong welfare system. Then we can disagree on the margins, but fundamentally we are in agreement.
I thank you for this working year and wish Niklas Karlsson a very Merry and peaceful Christmas. We will see if there will be any snow in either Örebro or Skåne - that will show itself!
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.