In 2009, every resident of Stockholm paid 7,180 kronor in hidden transfer payments “rather than the 90 kronor that the system would seem to suggest”, according to a report by Sofia Linder, an analyst with the Stockholm Chamber of Commerce (Stockholms Handelskammare).
The chamber argues it’s time for municipalities minister Mats Odell to change the system, which was last adjusted in 2005 and involves massive transfers of tax revenue between the state and Sweden’s municipalities and county councils.
“The system is completely ludicrous when Stockholmers give money to cities with strong economies like Gothenburg, Malmö, Örebro, and Norrköping,” Chamber of Commerce head Peter Egardt said in a statement.
During a debate arranged to coincide with the release of the report, the system was called Marxist and compared with the reign of the Khmer Rouge in Cambodia.
But there were also defenders of the current system included on the panel, which otherwise consisted of Moderate Party politicians from the well-to-do Stockholm-area municipalities of Täby, Danderyd and Huddinge.
Anders Lago, the Social Democratic mayor of Södertälje, south of Stockholm, thought the report’s conclusions were disgraceful.
“The rich want to have more and couldn’t care less about grandpa and grandma in Flen or the students in Rosengård. My municipality accounts for 15 percent of [Sweden’s] net exports. We contribute to growth in both Danderyd and Täby,” said Lago, according to the TT news agency.
“But people who work here [in Stockholm] don’t live in Södertälje, which also has a large share of immigrants and refugees.”
Södertälje municipality is among the net winners in the current system, as are other cities with healthy economies such as Gothenburg, Malmö, Örebro and Norrköping.
Each city ends up receiving more from the state in the form of equalization grants than it pays in equalization fees.
Over the years, the municipal tax equalization system – which started in the 1960s – has been reviewed several times, and is currently the subject of another government commission investigation into how to improve the system.
Björn Sundström, who heads the current review of the tax equalization system, explained how Malmö’s relatively low tax base has resulted in it becoming a net beneficiary of the system.
“Malmö has unbelievable growth, but the richest residents live in Vellinge or Lomma, which are neighbouring municipalities,” he told the panel.
But Stockholm Chamber of Commerce head Egardt remained highly critical of how the system redistributes Sweden’s local tax revenues.
“The system leads to 278 of Sweden’s  municipalities ending up with reduced capacity to carry out measures to boost economic growth. Sweden’s entire growth potential is weakened when the state throws gravel in the economic engine of Stockholm,” he said in a statement.