Swedish tax slashed by 42 billion kronor

The new budget presented by the government on Monday includes tax cuts worth 42 billion kronor. These reductions are to be financed by savings in areas such as unemployment benefits, health insurance and labour market measures.

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Finance minister Anders Borg intends to lower income tax by means of a tax deductible job allowance, expected to total 38.7 billion kronor.

The change will come into force on January 1, 2007.

During the election campaign the alliance parties promised that those on low to medium income levels would be left with an additional 500-1000 kronor in their pockets at the end of each month.

Furthermore, the government reckons that more tax reductions will be possible in 2008.

One change that has hogged recent headlines – tax deductible domestic services – is predicted to cost 650 million kronor and will be introduced on July 1, 2007.

A string of labour market measures are set to disappear, such as the controversial "plus jobs" and "free year" programmes. However, anyone who has begun such a programme will be allowed to see it through.

Later this autumn the government will propose a series of changes in the unemployment benefit system. These will include a maximum daily sum of 680 kronor, a reduction in benefits after the first 200 days, followed by an end to benefits after 300 days (or 450 days for recipients with dependent children).

The government will also look into removing the requirement for obligatory membership to an unemployment benefit fund.

Health insurance benefits are also to be reduced, an adjustment expected to generate an additional 1.7 billion kronor for the state coffers.

One move guaranteed to aggravate ice hockey players everywhere is an increase in the tax on snus, or snuff.

Trade unionists, meanwhile, will not be pleased by the fact that it will no longer be possible to deduct membership fees for unions or unemployment benefit funds.

The government also calculates that it will save 2 billion kronor by cracking down on benefit fraud.

In order to get more people onto the labour market the government plans to introduce "new-start jobs". Companies will be rewarded for employing young people and the long-term unemployed. For example, those who employ young people between the ages of 19 and 24 will pay half the normal employer charge.

Charges for dental care are to be capped. A further 250 million kronor is to be set aside for the national healthcare guarantee. More financial resources are to be made available for psychiatric care: 500 million kronor in 2007 and 2008, followed by 250 million for subsequent years.