• Sweden's news in English

Experts: politicians misled voters on pensions tax

Peter Vinthagen Simpson · 18 Aug 2010, 18:57

Published: 18 Aug 2010 15:32 GMT+02:00
Updated: 18 Aug 2010 18:57 GMT+02:00

Facebook Twitter Google+ reddit

"The debate before the election over tax cuts for pensioners is based on false premises. In actual fact those in work are taxed harder than pensioners in Sweden," said Helena Svaleryd and Daniel Waldenstein at the Research Institute for Industrial Economics (Institut för Näringslivsforskning - IFN) in a debate article in the Dagens Nyheter (DN) daily on Wednesday.

Svaleryd and Waldenstein argue that if you factor in employer contributions, which at least in part constitute a straight tax, then wage earners pay significantly more, even when taking into account the in-work tax credit introduced by the Alliance government in stages over the mandate period.

"Everybody who knows the Swedish tax system knows that pay is taxed in several stages. Aside from municipal and state income taxes, incomes are also taxed via payroll levies. Even if employer contributions are paid in by the employer it is the employee who in the end pays as incomes decline accordingly," the researchers argued.

Helena Svaleryd, who is a member of the Swedish Fiscal Policy Council - a body set up by the government in 2007 to provide an independent evaluation of the Swedish Government´s fiscal policy, suspects that the election year could be a contributory factor in why political rhetoric is at odds with current research and available facts.

"One could imagine that as the pensioners are one of Sweden's largest voter groups, this plays a significant role during an election year when pensioners' core issues also become the politicians' core issues," Helena Svaleryd told The Local on Wednesday.

In recent weeks the Red-Green opposition and representatives for individual Alliance parties have been striving to outdo each other in promising largesse to Sweden's pensioners and decrying the "penalty tax" levied on the group.

Social Democrat leader Mona Sahlin, speaking in Stockholm on Tuesday, went as far as to promise to spend 27 billion kronor ($3.7 billion) on wiping out the "discrimination" between the income taxes paid by pensioners and wage earners.

The researchers argue that there exists no "penalty tax" on pensioners and in fact wage earners pay more, pointing out that the payroll tax (roughly 20 percent of the total employer contributions and currently standing at 6.03 percent), amounted to 87 billion kronor in 2009, while the in-work tax credit amounted to only 66 billion.

"While there may be good reasons from a redistributive policy perspective to compensate weaker groups in society during a recession, all this talk of 'penalty taxes on pensions' just serves to muddy the issue, when openness and clarity are what is needed," Svaleryd told The Local.

In their article Svaleryd and Waldenstein also slammed the claim, forwarded in a recent report from the Swedish National Pensioner's Organisation (Pensionärernas Riksorganisation - PRO) that Sweden is the only country that taxes the elderly harder than wage earners, citing an OECD report entitled "Pensions at Glance (2009)" to support their argument.

"Pensioners pay higher income taxes (excluding social charges) than wage earners in a majority of the researched countries, for example Finland, Japan and Germany," they wrote.

The researchers observed meanwhile that it is very difficult to compare pensions internationally as systems are so different, but even after tax deductions Swedish pensioners were well off in an international perspective.

"In certain countries, such as Sweden and the Netherlands, pensions are, in an international perspective, relatively high and are taxed relatively highly. If you take the US as an example then you can see that while taxes are lower on pensions, pay outs as a proportion of final incomes earned are also lower," Svaleryd said.

Furthermore it is argued that pensioners as a group have also benefited from measures to encourage work as the pension system is at least in part based on the contributions of wage earners. They have also benefited disproportionately from the abolition of wealth taxes and changes to property taxes, the researchers pointed out.

According to official Statistics Sweden wealth figures from 2007, those aged between 65 and 74 are the wealthiest group in the country, with average wealth after deduction for debts of 1.34 million kronor, while the average for those aged 20-64 was only 682,000 kronor.

Story continues below…

Svaleryd and Waldenstein furthermore accused finance minister Anders Borg of jeopardising the principle of the pensions system as an "autonomously regulated welfare system" by using finance policy to compensate for lower pensions resulting from higher unemployment.

Anders Borg on Wednesday defended the billion kronor tax cuts announced in the spring budget to compensate pensioners for the fall out of the finance crisis on the pensions system.

"I don't think that anyone involved in the pensions agreement predicted that we would have these massive hits on stock prices and the economy. It is not reasonable that pensioners should be so affected by this," he told Dagens Nyheter.

While Svaleryd agreed that the extent and impact of the crisis was difficult to forecast, she argues that the move should be seen as a warning that does not bode well for the future autonomy of the pensions system.

"What happens in the future when the workforce declines?, as we know it will. If every time pensions payments decline voices are raised across the board for tax cuts, then the principle that the system should be autonomous from finance policy will be eroded."

Peter Vinthagen Simpson (news@thelocal.se)

Facebook Twitter Google+ reddit

Your comments about this article

17:49 August 18, 2010 by glamelixir
ok, seriously!!!!

Are you a journalist???

This should be written

Experts: "Politicians misled voters on pensions tax" - or without " if it is not a literal quote.... PLEASE YOU GUYS!

I should stop reading this site and stick to the Swedish news.
19:19 August 18, 2010 by stenhuggaren
another interesting and informative article on The Local, thanks.
19:20 August 18, 2010 by Byggare Bob
great to see that someone is keeping a check on these unprincipled vote diggers.
23:09 August 18, 2010 by wxman
"Politicians misled voters..." Who would have thought? My, my.
Today's headlines
Prime Minister to meet Swedish troops in Iraq
Swedish Prime Minister Stefan Löfven and his Kurdish counterpart Nechervan Barzani. Photo: Henrik Montgomery/TT

Sweden's Prime Minister Löfven is set to meet Swedish troops in Iraq on Tuesday.

Swedish politicians wage war on winter time
Soon it will look like this on your way home from work in Sweden. Photo: Anders Wiklund/TT

Should Sweden stick with summer time all year round?

'Don't turn the Pope into a global teddy bear'
Sweden's Queen Silvia and Princess Leonore visiting Pope Francis in the Vatican last year. Photo: Henrik Montgomery/TT

It's time to hold the Pope to account and make sure he turns his words about reform into action, argues a minister of the Swedish Church ahead of Pope Francis' visit to Sweden.

Löfven: 'Sweden will double its number of troops in Iraq'
Stefan Löfven and Haider al-Abadi during the visit on Monday. Photo: Henrik Montgomery/TT

Swedish Prime Minister Stefan Löfven has promised to double his country's number of troops in Iraq following a meeting with Iraqi counterpart Haider al-Abadi on Monday.

Will Swedes soon be looking for fairtrade porn?
Should Swedes think fairtrade with porn? Photo: Karin Malmhav/SvD/TT

A fairtrade attitude to pornography would be beneficial, Sweden's health minister told The Local.

Presented by Stockholm University
Nordic fashion in focus at Stockholm University
Simon Paulin/imagebank.sweden.se

Nordic fashion took centre stage in the Swedish capital last week as Stockholm University hosted the “first-ever” academic conference looking at luxury and sustainability in the fashion industry.

Referee, coach and parents in Swedish youth football fight
File photo of a referee holding a red card not related to the story. Photo: Stefan Jerrevång/TT

A football dad broke his leg in the brawl in front of 11-year-old kids after a Hammarby youth football game.

Illicit abattoir kept more than 100 bulls' penises
A couple of young bulls not related to the story. Photo: Jonas Ekströmer/TT

Dried cattle genitalia, goats' heads and hundreds of litres of lard were just a few of the many strange finds discovered when police raided a property in Sweden.

This is officially Sweden's most beautiful beard
The most beautiful beard in Sweden. Photo: Memo Göcek

According to a jury of barbers and 'well known bearded profiles', that is.

Presented by Invest Stockholm
One expat's strategy for making friends in Stockholm

You might think it’s hard to make friends in a new city. But if at first you don’t succeed – try something else!

Sponsored Article
Last chance to vote absentee in the US elections
Why we're convinced Game of Thrones is based on Sweden
Sponsored Article
This is Malmö: Football capital of Sweden
People-watching: October 21st-23rd
Fury at plans that 'threaten the IB's survival' in Sweden
Blog updates

6 October

10 useful hjälpverb (The Swedish Teacher) »

"Hej! I think the so-called “hjalpverb” (auxiliary verbs in English) are a good way to get…" READ »


8 July

Editor’s blog, July 8th (The Local Sweden) »

"Hej readers, It has, as always, been a bizarre, serious and hilarious week in Sweden. You…" READ »

Sponsored Article
Where is the Swedish music industry heading?
Analysis & Opinion
Are we just going to let half the country die?
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Angry elk chases Swede up a lamp post
The Local Voices
'Alienation in Sweden feels better: I find myself a stranger among scores of aliens'
People-watching: October 20th
Sponsored Article
Stockholm: creating solutions to global challenges
The Local Voices
A layover at Qatar airport brought this Swedish-Kenyan couple together - now they're heading for marriage
Sponsored Article
Swedish for programmers: 'It changed my life'
Swede punches clown that scared his grandmother
Fans throw flares and enter pitch in Swedish football riot
Sponsored Article
Top 7 tips to help you learn Swedish
Could Swedish blood test solve 'Making a Murderer'?
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Property of the week: Linnéstaden, Gothenburg
Swedish school to build gender neutral changing room
Sponsored Article
Stockholm: creating solutions to global challenges
People-watching: October 14th-16th
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Man in Sweden assaulted by clowns with broken bottle
Sponsored Article
Where is the Swedish music industry heading?
Nobel Prize 2016: Literature
Sponsored Article
One expat's strategy for making friends in Stockholm
Watch the man who discovered Bob Dylan react to his Nobel Prize win
Sponsored Article
Nordic fashion in focus at Stockholm University
Record numbers emigrating from Sweden
People-watching: October 12th
The Local Voices
'Swedish startups should embrace newcomers' talents - there's nothing to fear'
How far right are the Sweden Democrats?
Property of the week: Triangeln, Malmö
Sweden unveils Europe's first elk hut
People-watching: October 7th-9th
The Local Voices
Syria's White Helmets: The Nobel Peace Prize would have meant a lot, but pulling a child from rubble is the greatest reward
Missing rune stone turns up in Sweden
jobs available