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Moderates push back promised tax cut plans

Moderates push back promised tax cut plans

Published: 16 Aug 2011 15:23 GMT+02:00
Updated: 16 Aug 2011 15:23 GMT+02:00

Prime minister Fredrik Reinfeldt announced on Tuesday his Moderate Party was delaying plans to implement several tax reductions, citing increasing concerns about the state of the global economy.

At a joint press conference with finance minister Anders Borg, Reinfeldt explained that the government nevertheless hopes to introduce the reforms as part of the 2014 budget.

Reinfeldt said the government wanted to be “responsible” and delay the measures in the interest of maintaining a healthy safety margin for public finances.

The measures to be postponed include a fifth-round of in-work tax credits (jobbskatteavdraget) and a plan to cut taxes for pensioners.

A planned raising of the income threshold for paying state income taxes will also be delayed.

According to the government's calculations, the tax breaks would have cost a total of 17.3 billion kronor ($2.68 billion).

Borg stated at the press conference that the costly tax reforms were simply too costly in light of the latest forecasts.

“If we had carried them out, we'd have come close to balance or had a clear deficit,” he said.

At the same time, Sweden's National Institute of Economic Research (Konjunkturinstitutet) cut its growth forecast for 2012 by 1 percent down to 2 percent.

According to the Institute, unemployment in Sweden will likely remain at 7.5 percent through the end of 2012.

“There continues to be valid reasons for changing both the in-work tax credit and the income threshold,” Borg said, but added that the coming autumn budget would be “significantly tighter” than previously indicated.

Problems in the European banking system will likely affect Sweden's economy, said Borg.

“We need to have safety margins for that,” he said.

He emphasised, however, that he thinks Sweden is well-equipped to maintain its economic stability.

Reinfeldt added that the Moderates' campaign promises had been divided up into “immediate” proposals, which would definitely be carried out and ambitions which were dependent on economic developments.

“We were clear with the voters about how we viewed the order of things,” he said.

TT/The Local/dl (news@thelocal.se)

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Your comments about this article

19:35 August 16, 2011 by AlexCN4
We hope as Sweden to not be so much affect by crissis which will get soon in others european countries. If they have care with stability economy and a plan for this, will be good. I know that Sweden passed through a economy crissis in 82 until to 90 etc...Is sin now, Sweden is strong. In history was the most poor country.
19:43 August 16, 2011 by Abe L
There is always some excuse for not reducing taxes. Which is ridiculous in a country like Sweden where everything is taxed through the roof and most families have close to no discretionary income. It would in fact boost the economy substantially if people had more to spend.

In fact certain taxes, such as homeowners tax and the tax you pay when buying a house have a negative effect on the economy as it makes people even less able to purchase houses.
19:56 August 16, 2011 by Indignerad
Abe L: The world economy is going down the shitter, this is not the time to lower taxes. Reinfeldt and Borg are educated economists who are trying to maintain stability. Take your ideology elsewhere, it's not applicable in reality.
20:18 August 16, 2011 by rymagnusson
As little as I agree with M's ideology, they are at least far more responsible than the Americans of either party.
21:06 August 16, 2011 by astra2thor6
Read the FT about the success of the Moderates' financial wisdom ("Sweden raises rates for 7th time in a year" dated 6 July 2011). Makes me proud!
21:21 August 16, 2011 by Imperor
The only reason for this delay is that they have lost the majority in the Riksdag for the motion and can never pass it. To make it seem like "taking responsibility" they make it out like this, instead of loosing face!
21:35 August 16, 2011 by jacquelinee
@ Indignerad

I agree although I may have expressed it less strongly.

I have no problem paying taxes when they are used to maintain the standard of living to a high level. Taxation is necessary and although it is a pain in the hiney to pay taxes it is nice to drive on well maitained highways, use clean public toilets, have spotless road sides have hospital and medical care where you only have to pay minimally (yes people, fees are actually a form of payment) Perhaps more of the taxes should be alloted to improve the care and accountability of the medical system, but it is a fair one financially, albeit not perfect. It costs a small fortune for funeral and burial expenses in other countries. I know, my mom died in Canada last March and the buriel cost well over 75,000 :- Education costs are less although education like medical care is also an area that need a great deal of revamping.

I have no problem with not lowering taxes. The lowering of taxes usually means that the citizens who are not in the smaller, wealthier percentage of the populous are the ones that suffer more. Unfortunately, as in most countries, politicians are usually in the wealthy sector, so any tax and program cuts that are made are designed not to impact their "circle". That is just the sad reality. Tax cuts mean the general population suffers to some degree and in some respect.

Swedish government for the most is one of the worlds less corrupt ones, partially because of it's basic deparmentalised structure. When each department is sort of "self governing" in a way,it is far more difficult for óne basic corrupted "head" to poison the entire structure. We who reside in Sweden are fortunate, not so very much of the taxpayers dollars are "pocketed" as in other countries, maybe spent foolishly at times...but that is not the same thing.
21:47 August 16, 2011 by Abe L
Indignerad: There are other ways to maintain income as a government, you can still lower taxes. They could for one start charging for education and medial care, which are far more ideological then lowering taxes. People need discretionary income or they become very unhappy with far more pressing consequences.
22:09 August 16, 2011 by jacquelinee
Have you ever lived in a country that charges for education? A university education in Canada can cost anywhere from 280,000 :- to in excess of 2,000,000:- (and probably more) Every citizen should be able to have their children educated in order to succeed in life, not just the wealthy ones.

In the USA unless you have private heath insurance (which is expensive and not everyone can afford it ) If you get ill, often it can cost you your life savings, you have to sell your home and still end up in debt. Or worst case scenario, if you are less fortunate and have no home or savings and simply can't afford to pay, you are simply turned away. There have been incidents of people dying on the hospital steps because they did not have medical insurance and were refused treatment. By your name Abe L, I am assuming it stands for "Abe Lincoln" sorry if I am mistaken. If that is what it stands for, then possibly you are from the States and will know precisely what I am speaking of.

There has to be a better way of maintaining taxes than compromising citizens' health and fair education practises.
09:47 August 17, 2011 by Abe L
Jac, in the states there are plenty of opportunities for students to attend affordable state funded colleges in the US. The majority of the employed US citizens gets health insurance through their employer. There is no reason to make these things freely available, especially not if the best education in Sweden is not through 'free' institutions. It's perfectly acceptable for a student to work when in college to pay for their tuition and living.
09:58 August 17, 2011 by the fonz
I'm a Brit living here in Sweden. Whilst I don't agree with everything the government here does, the handling of the economy is not only sensible, it is fair and is a shining exapmle to the biggger nations. I do think tax is too high and may be a hinderance to investment in Sweden and as I ubnderstand it this government has made several tax reductions since taking office. It therefore proves that a lower taxed society will prosper as employment increases, spending increases and foreign investment increases. I believe official statistics proved in the UK following Nigel Lawson (I think it was him) cutting the top rate of income tax to 40% that the tax-take overall increased and the UK pulled itself out of bankruptcy.

I appreciate that the dynamics of the UK economy and Sweden are different, but the underlying principal is that a lower tax system will help the country prosper at every level.

I sincerely wish that the UK had such responsible, cautious policies and politicians as we enjoy in Sweden.
13:30 August 17, 2011 by engagebrain
Abe L

Sweden has one of the highest rates of social mobility, the USA is among the worst, in the Western world.

It's what you get when education and health care are commodities and on average the rich go the good universities and poor the get the rubbish.

Social mobility underpins a society where people are encouraged to maximise their potential, getting the best people into the most important jobs is good for everyone - and fair.
13:40 August 17, 2011 by Abe L
Engage: I agree with getting the best people on the right jobs, however that doesn't require certain things to be free and payed for by others. An intelligent and capable person will succeed professionally regardless.
14:23 August 17, 2011 by jacquelinee
@ Abe L.

It sure is a lot easier to succeed, be healthy get a masters etc when you have a rich family footing the bill. Of course you can succeed go to university and compete with those who have the financial ability to put their kids through university. You can put yourself in debt up to your ying yang and spend the first 10 years of your career paying off exhorbitant student loans. (sad for the poorer kids who can't get student loans) and the tax dollars can go instead to a glut of military expenditures utilized by war mongers like Bush who, in true southern style, are "Just itchin' for a fight", while education is reserved for the wealthy or indebted and those intelligent enough, but unable to have the financial means, only perpetuate a growing number of under educated and therefore, lower wage earners; The working poor or the unemployed due to lack of education. This is nothing new " The rich get richer and the poor get poorer"

I would rather by far have my tax dollars be placed into education and health care, than into a way overfunded military or into the pockets of corrupt politicians spending it on wining, dining, the purchase of private personal jets, trips to France for brunch, bailouts for their friends businesses, ladies of the evening etc. (Incidentally, with the exception of the overfunded militiary (truly american) These are incidents from Canadian Government history that I have only become aware of because they got busted)

Sweden should be commended, not crtiticised for using their taxation for the benefit of their citizens. While a tax break would really be nice, personally speaking (and I can only speak for myself) I would rather pay a bit higher tax to maintain good programs that benefit all who live in Sweden, not just the wealthy.
14:33 August 17, 2011 by engagebrain
13:40 August 17, 2011 by Abe wrtoe

Engage: I agree with getting the best people on the right jobs, however that doesn't require certain things to be free and payed for by others. An intelligent and capable person will succeed professionally regardless.

A few will succeed, otherwise there would be no social mobility in the USA. Equal access to decent education, housing, healthcare etc create a level playing field. Social mobility is higher in Sweden, which pretty much has a level playing field - the level playing field costs, but those who are more successful pay back more. Whereas in the USA, as Warren Buffet pointed out yesterday the rich pay lower rates of tax and social mobility is low..
12:13 August 18, 2011 by Borilla
@ Abe L

Are you in Sweden to stay or just here working for while? Sounds like you don't want to share the burden. The M's are not decreasing taxes because they don't have the votes to do it. Your solution is to improve the position of the rich at the cost of the poor, take food out of hungry people's mouths and force the elderly to make the terrible choices they have to make in the US; Do I buy food or do I buy the medicine I need to stay alive? If it weren't for global warming you could just put them on an ice floe, like the Inuit, and send them out to sea.
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