More tax cuts in the pipeline

Sweden's Finance Minister Anders Borg has proposed further tax breaks for people in work. The tax breaks will lead to a reduction in income for the state of up to 10.8 billion kronor.

Borg put forward two alternative proposals for tax cuts to be introduced in January 2008. The less costly proposal of 8.5 billion kronor will be introduced if the national finances do not permit higher tax cuts.

In both proposals, the size of people’s personal allowance, the amount on which they do not have to pay income tax, will be raised from 31,000 to 37,000 kronor.

“Sweden has had a notably high tax burden for people on low and medium incomes, which has hindered employment. Given that most of the tax cuts in the working tax credits fall on those with low and medium incomes, we are clearly raising the motivation for more people to go out onto the job market,” Borg said.

The tax cuts follow previous cuts introduced in January.

The new proposals would mean a healthcare assistant earning 20,800 kronor per month would keep 179 kronor more under if the cheaper of the two proposals is put through, or 223 kronor if the more expensive proposal is implemented. Someone on 25,300 a month would also get an extra 179 kronor per month under the first proposal, but 254 kronor under the second.

The finance minister would not give details of how the tax cuts would be financed, saying that more would be presented in the autumn budget.

The OECD and Sweden’s central bank, the Riksbank, have warned the government of the dangers of pursuing an expansive economic policy, but Borg defended his plans.

“If you want to prevent a period of growth from overheating then you need to stimulate employment,” he said.