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EUROPEAN UNION

Swedes pay less tax than the Danes

Danes pay the highest level of tax in the EU, measured as a tax-to-GDP ratio of 48.2 percent, pushing Sweden into second place with an overall tax take of 47.1 percent, new figures from Eurostat show.

“In comparison with the rest of the world, the EU27 tax ratio remains generally high and more than one third above the levels recorded in the USA and Japan. However, the tax burden varies significantly between Member States,” Eurostat said in a statement on Monday.

The overall tax-to-GDP ratio in the EU27 was 39.3 percent in 2008 and so both the Swedes and the Danes pay significantly more in tax than the EU average.

The overall tax take has increased somewhat since the financial crisis, from 39.7 percent in 2007, but still down on 40.6 percent in 2000.

Romania has the distinction of paying the least tax in the EU with a take of 28 percent, followed by Latvia on 28.9 percent, Slovakia on 29.1 percent and Ireland on 29.3 percent.

Swedes, who long occupied top spot in the rankings, have seen their tax burden declined steadily from a 2000 high of 51.8 percent. Neighbouring Finland has also cut its levies from 47.2 percent in 2000 to 43.1 percent in 2008.

Cyprus and Malta have meanwhile experienced the highest increases over the period, from 30 percent to 39.2 percent, and 28.2 percent to 34.5 percent respectively.

Among euro area countries the overall tax ratio fell to 39.7 percent in 2008, from 40.4 percent in 2007 with taxes following a similar trend to the EU27, just at a slightly higher level.

The largest source of tax revenue in the EU27 is labour taxes, representing over 40 percent of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.

In Sweden “implicit tax rate” on labour has declined from 46 percent in 2000 to 42.1 in 2008, and on capital, from 43.2 percent to 27.9 percent over the period. Taxes have meanwhile increased on consumption, from 26.3 percent in 2000 to 28.4 percent in 2008.

Sweden still has the highest top tax rate on personal income in the EU27 with 56.4 percent in 2010, followed by Belgium on 53.7 percent and the Netherlands on 52 percent. The lowest top rate income taxes can be found in Bulgaria with 10 percent, and the Czech Republic and Lithuania on 15 percent.

This information comes from the 2010 edition of the publication Taxation trends in the European Union issued by Eurostat, which is the statistical office of the European Union and the Commission’s Directorate-General for Taxation and Customs Union.

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Explained: Why is Sweden so worried about the EU’s minimum wage plan?

EU labour ministers meet in Brussels on Monday to discuss the European Commission's planned minimum wage directive. Why is the proposal causing such unease in Sweden?

Explained: Why is Sweden so worried about the EU's minimum wage plan?
Customers visit a branch of McDonalds in Stockholm. Photo: Stina Stjernkvist/TT

What’s happening on Monday? 

EU ministers responsible for employment and social affairs, including Sweden’s Eva Nordmark, will meet in Brussels for a two day meeting at which they hope to adopt a European Council position on a directive imposing “adequate minimum wages” on all EU countries. Once the Council, which represents member states, has agreed a common position, it will begin negotiations with the European Parliament and the European Commission. 

What’s Sweden’s position on the minimum wage directive? 

Sweden has been, along with Denmark, one of the most vocal opponents of the directive, arguing that it threatens the country’s collective bargaining model, in which unions and employers set wages without government interference. 

But on Friday, the government dropped its opposition, together with country’s umbrella union, the Swedish Trade Union Confederation, arguing that a compromise proposal put forward by the European Commission would protect Sweden’s wage autonomy. 

A majority of the members of the Swedish parliament’s employment committee are backing the government’s new stance, but three opposition parties, the Moderates, the Christian Democrats, and the Sweden Democrats, are opposed to the change in position. 

“I am extremely happy that there is broad support and majority backing for us to continue with the negotiations, to stand up for what we have come to so far, and do everything we can to protect the Swedish wage-setting model,” Sweden’s employment minister Eva Nordmark (S) said after a meeting with the employment committee on Friday. 

READ ALSO: Why Sweden doesn’t have a minimum wage and how to ensure you’re fairly paid

Why did Sweden make its dramatic last-minute u-turn? 

Sweden’s government judges that, after the compromise, the directive will no longer mean that Sweden is forced to bring in a statutory minimum wage. 

“I consider, together with experts in the civil service and experts in the unions and employer organisations, that there is no requirement for Sweden to bring in a statutory minimum wage,” Nordmark told TT. 

She added that agreeing to sign up to the directive would give Sweden the ability to take a deeper part in the negotiations giving it the power to make sure that important exceptions are made for Sweden. 

Denmark, however, is still resolved to say ‘no’ to the directive. 

Surely a minimum wage is a good thing? Isn’t Sweden supposed to be a high-wage economy? 

Sweden is certainly a high-wage economy, but that is largely thanks to its model of collective bargaining, under which wages are generally set by negotiations between employees and employers for each sector. 

If the directive sets a precedent allowing governments, either at a national or EU level, to interfere in this process, or for those who disagree with the result of the collective bargaining agreement to appeal to government entities, it could undermine the Swedish system. 

Who is still worried? 

More or less everyone. While the Swedish Trade Union Confederation is supporting the government’s decision, its vice chair Therese Guovelin, described the European Commission’s compromise proposal as simply “the least bad compromise proposal” the union had seen.

She has previously described the European Parliament’s position that the directive should apply to the entire European Union as “a catastrophe”.

“That would mean that a disgruntled employee who is not part of the union, could take their case to court, and would then end up at the EU Court, and it would then be them who would decide on what should be a reasonable salary,” she explained. “In Sweden, it’s the parties [unions and employers’ organisations] that decide on that.”

Tobias Billström, group leader for the Moderate Party, said he was concerned at the role of the European Court in the directive. 

“There are big risks with this,” he told TT. “The EU court might decide to interpret this directive as applying across the board, and then we might end up with what we wanted to avoid. The Moderates have as a result been against this development, and it’s important that Sweden gets to decide itself on the Swedish labour market.”

What might happen now? 

The European Parliament might try to remove the wording and the exemptions which Sweden hopes will allow its employers and unions to retain control of wage-setting. 

Mattias Dahl, chief executive of the Confederation of Swedish Enterprise, which represents employers’ groups, said that the government needed to stand its ground in the upcoming negotiations, reiterating that he would have preferred that the European Commission had not sought to give itself such a role in the Labour Market.  

Nordmark said that Sweden did not intend to back down to the parliament. 

“These are important red lines for us. If there are demands from the European Parliament that push in a different direction, we can lean on the Swedish opinion and what we stand for,” she said. 

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