Sweden's centre-right coalition government said it would cut the corporate tax rate to 26.3 percent from 28 percent from 2009.
This will cost around 7.0 billion Swedish kronor. The government also said it would reduce the social contribution fees paid by employers by around 1 percentage point and make it less expensive to employ young people.
The government said it would finance the bulk of the cuts by making adjustment to the tax system which currently allow companies to reduce their tax burden by taking advantage of existing loop holes.
"Corporate tax is one of the taxes which large companies really study when they plan to set up business somewhere," said Liberal Party (Folkpartiet) leader Jan Björklund at a press conference at Tobii Technology in the Stockholm suburb of Danderyd.
Sweden's corporate tax rate has held steady at 28 percent since 1995 and at the time it was low in comparison with other countries in Europe.
Since then, other countries have reduced their own corporate tax rates, bring the average in western Europe to 26 percent, according toBjörklund.