The tax cut will cost the government 550 million kronor in lost revenues, but that is likely to be cancelled out by increasing the tax on “alco-pop” drinks and an extra 1.50 kronor tax on a packet of cigarettes.
The government wants to introduce the 40% cut in the tax on spirits as part of the 2006 budget. The price of a bottle of Absolut Vodka at Systembolaget, the state-run alcohol monopoly, will fall from 230 kronor to 160 kronor.
The impetus for the reduction has come from the rapidly-widening black market in booze smuggled in from abroad.
At the same time, Pär Nuder declared that Sweden’s public finances are in such good shape that the government is ready to come good on its promise at the last election to cut income tax as compensation for increased general social security contributions.
That will mean an extra hundred kronor in taxpayers’ pockets each month.
From the July 1st 2006 the government wants to raise the ceiling on sickness benefit, giving people on sick leave 80% of their salary up to almost 33,000 kronor per month.
But the proposals still need to be approved by the government’s coalition partners, the Left Party and the Greens. And that will be far from plain sailing.
“It’s not exactly a secret that we say no to reducing alcohol taxes,” said the Left Party’s Ingrid Burman.
Nor is she happy about the idea of cutting income tax.
“Instead, we want to raise tax on incomes over 310,000 kronor per year. What’s needed is an increase in resources for the provinces and local councils so that they can employ more staff,” she said.
The coalition budget discussions will begin on Monday and another thorny issue will be the Green Party’s core demand of an increased environmental tax.
According to an earlier deal, that was to bring in 3.6 billion kronor. Now, Nuder says that the government wants to reduce that since he sees few options for raising tax on energy and fuel.
“We have a situation where we have very high electricity prices, high prices on motor fuel and at the same time manufacturing industries face enormous competition.”
But the Green Party’s Yvonne Ruwaida won’t relinquish the deal without a fight.
“The sum is fixed and there is no reason to change it,” she said.
Nevertheless, both the Greens and the Left Party are willing to discuss the matter, saying that they want to prioritise other investments over the government’s proposal to cut income tax.