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Swedish taxpayers least honest in the Nordics

Swedish taxpayers least honest in the Nordics

Published: 08 Feb 2013 17:28 GMT+01:00
Updated: 08 Feb 2013 17:28 GMT+01:00

Sweden has the biggest black market in the Nordic region, according to a new study, which also found workers in France are more honest than their Swedish counterparts in reporting their income to tax authorities.

According to an annual survey by German economic institute IAW, the black market in Sweden is estimated to represent 13.9 percent of the country's GDP.

The figure compares favourably to Greece and Italy, where undeclared economic activity totals 24.6 percent and 21.1 percent of GDP respectively, yet Sweden's shadow economy is larger than the OECD average of 12.6 percent of GDP.

Finland and Denmark, meanwhile, have under-the-table economies measuring 13.0 percent of GDP, according to the study, with Norway's measuring 13.6 percent.

Tax authorities in France and the UK were found to be collecting a larger portion of taxable income than any of the Nordic countries, with the black markets there estimated at 9.9 percent and 9.7 percent of GDP respectively.

For the tweltth year in a row, however, the world’s most honest taxpayers are found in the United States, where unreported economic activity only accounts for 6.6 percent of GDP, the study found.

While Peter Isling, spokesman for the Confederation of Swedish Enterprise (Svenskt Näringsliv), hadn't reviewed the details of the IAW study, he initially expressed surprise that Sweden didn't rank higher than its OECD counterparts.

However, he cited the high taxes on Sweden's relatively small service sector as one of the possible explanations.

"Sweden has relatively high taxes on services. And if it costs a lot to purchase certain services, consumers are often open to getting things done in an alternative way," he told The Local.

"What we've seen, however, is that the reforms allowing tax breaks on household services and home improvement work have had an effect. The black market in these sectors has decreased."

Indeed, the study found that Sweden's shadow economy has shrunk by 4.2 percent in the last decade, one of the largest decreases among the 21 countries included in the study, which ignored earnings from criminal activity.

However, Sweden's high taxes and relatively high entry-level wages likely help fuel the black market, according to Isling.

"There simply aren't that many entry-level service jobs in Sweden, in part because wages at the bottom end of the scale are relatively high, and in part because they are taxed so much," he said.

"If services are really expensive, consumers may turn to the black market."

He suggested that extending tax breaks to other sectors might also help Sweden reduce the size of its shadow economy.

"Similar reforms in other sectors could lower prices for consumers so they would be less tempted to buy on the black market."

David Landes

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Your comments about this article

18:48 February 8, 2013 by skatty
I think the report is true; however, I wonder why it has been discovered so late!

First time, I have learned and heard about escaping from tax in my SFI class and by my Swedish language teacher at school for many years ago. He was talking about how to find a carpenter to repair his house not on a formal contract, but by an agreement out of the tax regulations!

My nervous chain smoker Swedish teacher had many ideas about different methods of escaping from tax in his SFI class; however, he always encouraged us (the newcomers) to follow Swedish laws and regulations during his chain smoking in pause times.
19:26 February 8, 2013 by theobserver
Ha, ha, there goes the Swedish honesty down the drain! Swedes have sworn to me that they are the most honest, the most lawful, the most proper citizens in the world. "Tax authority", Swedes told me, "is like religion for us; we never, ever, think about not paying taxes properly."

What a bunch of liars!

It's funny that they try to make newcomers pay taxes when they themselves avoid them.
22:57 February 8, 2013 by ZZTop
Nor surprise there. This is the new Sweden. Go to Malmö and ask for a receipt in most restaurants or small shops, and they will look at you in astonishment. If they understand you.
08:44 February 9, 2013 by Lavaux
The problem is the high VAT rate on services, the high social fee rates, and the fact that tax-compliant sole traders must add these high taxes into the price of their services. In competitive services markets, one gets much more competitive the less tax-compliant one operates.

By some estimates, the illicit economy in Sweden is as large as 19% of GDP, measured by comparing the velocity of cash money with other kinds. Sweden's leftists don't like to talk about tax avoidance and evasion because it contradicts their entire theory of human nature. In truth, Swedes are just as rational when it comes to economic calculation as any other people, and just as motivated by self-interest.
10:10 February 9, 2013 by eppie
I think Sweden still thinks the world is like it was 20 years ago.

There are many rules but there is not really a lot of enforcement. 20 years ago that was fine but swedes have become more capitalist and egoistic and so will evade taxes.

Traffic is another perfect example; there are lots of rules but everybody knows that in Stockholm the chance of being caught when you pass with a red light is almost 0.....so everybody does it now. Every other country in europe (even the southern ones) and the US use traffic camera's but Sweden still think they don't need these.
18:10 February 9, 2013 by Kronaboy
I would go further, from my experience EU structural funds are often fraudulently misused (including by well-known household brands) in bogus EU-funded training programmes whereby unproductive lazy swedes (who would otherwise be redundant) are permitted stay at home for 2-3 days a week, rather than thrown out on the dole where they belong????
10:34 February 10, 2013 by Migga
Link this story with the one about the fake wheelchair guy and you`ll understand why the rate has gone up.

http://www.thelocal.se/46098/20130209/
12:27 February 11, 2013 by matressmonkey
Would love to see the breakout of cheats according to ethnic Swedes, first generation Swedes and immigrants. Is it that Swedes are becoming more corrupt, or that Sweden is accepting newcomers from more corrupt cultures? And my dad's from Syria so I'm just calling it as I see it, not out of some bias.
12:49 February 11, 2013 by Twiceshy
You guys with the usual racist comments, didn't you read the article? It says that the black market economy is DECREASING.
14:26 February 11, 2013 by matressmonkey
A large reason the Swedish black market economy is decreasing on paper is because of the way it is measured. The measurement is also affected by programs such as Rut Avdrag which took effect in 2007. This program has reduced one piece of the black market via massive tax-funded government spending while other parts of the black market have grown and grown steadily. And its not because our generous Swedish hosts have suddenly gone gangsta.
09:29 February 12, 2013 by Max Reaver
LOL, I see trolls who relate this matter to immigration as a brainless-reflex!
01:57 February 18, 2013 by workforthesoup
A sizeable majority of thelocal readers are racist and they themselves are immigrants! What a hypocrisy!
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