Sweden?s tax rates ?could get even higher?

Swedish voters hoping that tax might fall after the next election could be in for a disappointment. Although the country already has some of the highest personal tax rates in the world, the ruling Social Democrats paved the way this week for tax rises. Meanwhile a major opposition party, in an apparent bid to attract Social Democrat voters, said that it now no longer wanted tax cuts.

As the Liberal Party gathered for its annual conference, the party’s pollsters were presenting the profile of the type of person that Liberals need to attract to gain more support at the general election in 2006 – and bring the centre-right to power.

Their target voter is ‘Lennart’, a middle-aged man from Västerås working in the private sector, who voted for the Social Democrats at the last election. Lennart, says polling company Demoskop, wants to maintain standards in public healthcare and welfare, but wants to fight abuse of the welfare system.

It was against this background that Liberal leader Lars Leijonborg broke with party tradition, and came out in favour of a tax freeze. Until now, Liberals have argued for reduced taxes, but Leijonborg told Dagens Nyheter on Friday that he was “ready to accept high taxes”, saying that the party believed, “like most Swedes” in the virtues of welfare and spending on public services.

DN said that the Liberals were trying to learn from the success of Danish ruling party Venstre, which went on to overturn the ruling Social Democrats’ majority by arguing for a tax freeze. The paper also said that Leijonborg was trying to avoid the criticism levelled at the Moderate Party, with which the Liberals are allied. Critics have said that the Moderates’ plans for tax reductions are unrealistic.

Leijonborg said that he hoped that the tax freeze would be adopted as the alliance’s official policy. Yet there was a distinctly lukewarm reaction from the other parties that make up the right-wing block. Mikael Odenberg from the alliance’s largest member, the Moderate Party, said that a freeze was “a good start,” but said that his party would not be satisfied in the long term for Sweden to maintain “the world’s highest tax burden.”

Yet while the opposition might no longer be unanimously in favour of tax cuts, comments this week by ministers favouring higher taxes showed that a gulf remained between the right and left of Swedish politics. Prime Minister Göran Persson said that taxes would have to go up sometime in the next parliament in order to maintain Sweden’s health service.

Confirming Persson’s line, Finance Minister Per Nuder said that if Swedish voters wanted a better welfare state in the future, there could be a need for higher taxes. He indicated that local taxes would be the most likely to be raised.

“We Social Democrats will not hesitate to raise taxes if that is necessary to defend our welfare model,” he told Swedish Radio.

Sources: Svenska Dagbladet, Sveriges Radio, Dagens Nyheter