• Sweden edition
 

Ex-minister: financial transactions tax 'failed'

Published: 15 Jan 2012 09:08 GMT+01:00
Updated: 15 Jan 2012 09:08 GMT+01:00

As Europe debates whether to apply a tax on financial transactions, a former Swedish finance minister says Sweden's experience in the 1980s was so negative it repealed the tax as plunging trading volumes led to disappointing tax revenues.

"The Swedish experiences were negative, both from the point of view of the state's finances and from a general socioeconomic perspective," former finance minister Bo Lundgren, 64, told AFP.

In 1984, the Social Democratic government introduced a tax of 0.5 percent on each purchase or sale of shares (a level that was doubled two years later) and 1.0 percent on options. The tax on bonds varied depending on the maturity, ranging from 0.03 to 0.001 percent.

The tax was levied on brokerage services.

The Swedish government later introduced a tax on currency transactions in 1989.

But the consequences of both taxes were considered so harmful to the markets that they were soon abolished: the one on currency transactions was removed after just 16 months, in 1990, and the other was removed after eight years, in 1991.

Lundgren, who had the tax on shares, options and bonds abolished when he was finance minister in a centre-right government, told AFP the effects of the currency transaction tax "were so dramatically negative that all currency trading basically moved from Stockholm to London, so the Social Democratic government (in power at the time) abolished the tax."

Meanwhile, the tax on shares, bonds and options "led to share trading moving abroad but the effects were not as dramatic as the currency transaction tax."

"The year we abolished it, in 1991, the tax revenue amounted to around three billion kronor", or about 375 million euros ($476 million) in today's currency.

"But on the other hand the tax had reduced share trades so much that once it was abolished, trading increased and that in turn led to an increase in brokerage fees which led to an increase in corporate tax (revenues) and other tax (revenues) increased."

"When the tax was abolished we estimated that there was no loss (of revenue) involved, because it led to such a sharp increase in trading."

In his proposal to parliament repealing the tax on shares, options and bonds, Lundgren said at the time that "activity on the Swedish stock market has decreased sharply in recent years which has resulted in a series of disadvantages for Swedish industry."

"The tax on shares and other securities has contributed to this development," he said.

He said Swedish companies suffered from reduced liquidity on the stock market and had a harder time raising risk capital.

Lundgren, who is now the head of Sweden's National Debt Office, and Sweden's current Finance Minister Anders Borg -- both members of the conservative Moderate party -- have voiced opposition to the European Commission's proposal to tax financial transactions.

The Commission in September proposed a tax of 0.1 percent on stock and bond transactions and 0.01 percent on derivatives, aimed at pulling in up to 55 billion euros ($70.4 billion) annually.

France and Germany are in favour of the tax and have said the 17-member eurozone could adopt it on its own, while non-euro member Britain is fiercely opposed to it amid fears it could prove devastating to its global financial hub, the City of London.

Paris has gone so far as to say it could begin introducing the tax on its own if a broader agreement is not reached.

AFP/The Local (news@thelocal.se)

Don't miss...X
Left Right

Your comments about this article

11:15 January 15, 2012 by Nemesis
Swedens opposition to transaction taxes and glass-steagal type laws was noted by everyone in Europe during the last round of European negotiations.

Borg's need to parrot for Tomothy Geithner and to attempt to introduce US style financial policy at every oppertunity, should never be under estimated.

The previous Swedish law only collected taxes on Swedish bonds traded internally in Sweden and the government at the time refused to even consider extending it to cover Swedish bonds traded outside Sweden.

The way the proposed new 'Tobin Tax' law would work in the European Union means that traders will not be able to bypass Europe. No matter where an EU countries bond is traded world wide, tax will have to be paid.

It might be an idea for the local when writing articles to actually include the facts :)
12:03 January 15, 2012 by RobinHood
@Nemesis

"The way the proposed new 'Tobin Tax' law would work in the European Union means that traders will not be able to bypass Europe."

Yes they will. They will simply shift billions of Euros of business and investment out of Europe, to countries where they do not have to pay tax on their trades. Exactly as Bo Lundgren said happened in Sweden. Any earnings from the tax will be offset, or worse, by loss of business. Exactly as Bo Lundgren said happened in Sweden.

If France and/or Europe introduce the tax, it will repeal it after a few years. Exactly as Bo Lundgren said happened in Sweden.

As the British have correctly pointed out. The only way for the tax to be implemented successfully is for it to be universal. I wouldn't take too much notice of what France has to say about it anyway. Mr Sarkozy will be gone in a few months, and Mr Hollande agress with the British.
09:04 January 17, 2012 by karex
Sarcokzy (and even Sweden for that matter in the 80s) should have looked first at previously existing examples around the world before making stupid decisions. As usual, politicions don't think before they act. Other countries outside Europe have tried this and failed miserably. If Sweden at the time had bothered to check they would not have needed to use their own economy as a guinea pig. Sarkozy is a double idiot because he has an example staring him in the face in his own back-yard, he doesn't need to look very far.
Today's headlines
Sponsored Article
On the move: Sweden's shifting mobility trends
House keys: Shutterstock.

On the move: Sweden's shifting mobility trends

Finding somewhere to live when you move to Sweden is a challenge. With changes afoot The Local caught up with an expert from letting agency Residensportalen to find out in what direction the market is going, and how Google Glasses may just help you find your dream home. READ () »

The Local List
Ten most disgusting Swedish foods
Salty liquorice, anyone? Photo: Anders Wiklund/TT

Ten most disgusting Swedish foods

Swedish food is, of course, a matter of taste. But it's mostly disgusting. Our loyal followers on Twitter and Facebook shared what they thought were the worst of them all. READ () »

Sweden wants cruise missiles 'for defence'
Defence Minister Karin Enström. File photo: TT

Sweden wants cruise missiles 'for defence'

The Swedish government has announced plans to beef up its defence forces by fitting its fleet of Gripen fighter jets with long-range cruise missiles. READ () »

Swede of the Week
Sweden's oldest would-be MP: 'They promised I wouldn't get in'
Swedes vote in the 2010 elections. File photo: Dan Hansson/TT

Sweden's oldest would-be MP: 'They promised I wouldn't get in'

Gösta Arvedson, 89, is the oldest Riksdag candidate in Sweden, but our Swede of the Week explains that the Liberal Party (Folkpartiet) had to make some unusual promises for him to put his name forward. READ () »

Elections 2014
Most Swedes lack info ahead of EU vote
The Green Party is one of only two parties devoting their websites to the EU elections. Here campaign manager Emma Rung presents the party's posters. Photo: Leif R Jansson/TT

Most Swedes lack info ahead of EU vote

The majority of Swedes feel the country's political parties are not doing enough to inform them about the upcoming European Parliament elections. Only two of the eight parties have dedicated their homepages to the May 25th polls. READ () »

Fatal Norrköping Brawl
Local church tried to stop Norrköping murders
Swedish police on the scene following Monday's fatal brawl. File: TT

Local church tried to stop Norrköping murders

The Syrian-Orthodox Church in Ektorp had tried to quell tensions between two rival families just hours before bad blood spilled into a massive brawl and two brothers lost their lives. READ () »

JobTalk Sweden
'Foreigners don't need to show banks Swedish ID'
The bridge that connects Sweden to the European continent. File: L.E. Daniel Larsson/Flickr

'Foreigners don't need to show banks Swedish ID'

The Swedish agency that helps Europeans fight impediments to the EU principle of free movement has revealed an increase in complaints, including one from a foreign citizen unable to open a bank account in Sweden. READ () »

Eurovision 2014
Pig heart shatters in Sweden's Eurovision clip
Sanna Nielsen in the new clip. Photo: YouTube (screenshot)

Pig heart shatters in Sweden's Eurovision clip

Sweden's Eurovision hopeful Sanna Nielsen released the official video for the song Undo on Wednesday, a clip featuring leather, slow motion destruction, and a frozen pig's heart and some violence. READ () »

Software robot pinches Swedish flats in seconds
Swedish apartments. File: The Local

Software robot pinches Swedish flats in seconds

A Swedish landlord suspects that a property fixer has set up a software robot to sign up for new flats on the market within seconds, and is charging house hunters to use the service. READ () »

Swedish zoo fire 'kills only the spiders'
Photo: Johan Nilsson/TT

Swedish zoo fire 'kills only the spiders'

Twenty-five fire fighters were on hand on Wednesday night when a fire broke out in a southern Sweden animal park. The vast majority of the animals were unharmed, but the cluster of spiders wasn't so lucky. READ () »

RECEIVE OUR NEWSLETTER AND ALERTS
Shutterstock
Sponsored Article
On the move: Sweden's shifting mobility trends
finest.se
Gallery
People-watching April 23
TT
Gallery
Inside the 850-year-old king's coffin
Features
Sponsored: South-eastern Sweden offers Öland beaches and more
Gallery
Swedish underwear shop puts staff in front of the camera
Gallery
IN PICTURES: The Local's Property of the Week - Täby
Sponsored: India+Sweden Week - India Unlimited
Features
Sponsored: India+Sweden Week - A film, food, and finance feast
National
University applications rocket to record high
finest.se
Gallery
People-watching April 18-20
TT
Society
Kids in Victorian garb mark Swedish Easter
Shutterstock
National
Swedish MP ordered chemtrail probe
Society
Swedish supermarket Ica pulls contested Easter commercial off air
Advertisement:
Kungahuset
Society
Swedish royals set baptism date for princess
finest.se
Gallery
People-watching April 16
Politics
Who's the prime minister's heir?
Alfie Atkins
Society
Are children's books the key to families integrating in Sweden?
National
'Sweden Dem protests cater to party's martyr image'
National
'Swedish research grants were fantastic, but now it's like Australia'
Society
Only in Sweden: The ten problems you'd never encounter elsewhere
National
Swedes stopped to take my picture, but didn't look me in the eyes
Business & Money
A swipe of the hand replaced cash and cards in Lund
YouTube
Features
Video: Oliver Gee finds out how to embrace The Swedish Hug
TT
National
Abba duo hints at reunion
Private
National
Flash mobs hug it out across Sweden
Stockholm School of Economics
Sponsored Article
Why a bachelor's degree is no longer enough
Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Blog Update: The Diplomatic Dispatch

28 October 15:16

The Green Growth Group Summit »

"Today on the 28 October in Brussels, a large group of key EU Ministers and business people, including UK Secretary of State for Energy and Climate Change Edward Davey, and Swedish Environment Minister Lena Ek, will meet to discuss green growth. They all have a stake in resolving a challenge which, although it is crucial..." READ »

718
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com