Unions demand tax increases

Swedish trade union organization LO has called on the government to raise the level of VAT on food and culture to finance increases in benefits. The plans have been attacked by Moderate Party politicians, who say that VAT should stay as it is, and that both benefits and taxes should be cut to encourage people back to work.

LO economists Dan Andersson and Åsa-Pia Järliden Bergström, writing in Dagens Nyheter, also advocate abolishing tax relief on private pension savings.

According to the authors “It is necessary to create uniformity in the tax system. The welfare state of the future must be financed by increased tax income from a wider base”.

Other suggestions from LO were directed at the committee established by the government to examine the tax system. These included calls for enhanced co-operation between the tax authority, customs and the Swedish debt enforcement service at the international level. They also stated that there needs to be better control of household income, which they argue can be achieved by means of improved co-operation between domestic agencies such as tax authorities and social security offices.

Confidentiality requirements often prevent the sharing of information today. LO would also like to see new measures to tackle the black economy which they say distorts competition between companies.

“Our position on tax increases is that they should be as small as possible. However when people demand better care for the elderly and more daycare staff – then it should be also possible to finance this together – and raise taxes”.

The LO economists want to raise the child benefit in order to compensate for the effects of a VAT rise on food. LO also questions other forms of tax relief which they believe are an obstacle to the goal of uniformity in the tax system such as capital gain tax deferrals and the recent changes to taxes on inheritances and gifts. In LO’s view these forms of tax relief give away billions to the most affluent in society.

The LO proposals have found little favour with opposition parties. Moderate Party spokeswoman Gunilla Carlsson said that her party “is not looking to change VAT on food.”

“We were against the idea of lower VAT for food and culture when it was first introduced, but now we see the benefits.”

The Moderates also dispute that tax should be raised in order to fund raises in benefits. Carlsson argues for cuts in benefits, accompanied by cuts in income tax for people on low and middle incomes.

“Too many people are not working,” she says. “We want to give people a financial incentive to get back to work – we want people to feel that they can live a good life with work.”

David Murphy

David Murphy is managing director of Word of Mouth Communications