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Moderates push back promised tax cut plans

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Moderates push back promised tax cut plans
15:23 CEST+02:00
Prime minister Fredrik Reinfeldt announced on Tuesday his Moderate Party was delaying plans to implement several tax reductions, citing increasing concerns about the state of the global economy.

At a joint press conference with finance minister Anders Borg, Reinfeldt explained that the government nevertheless hopes to introduce the reforms as part of the 2014 budget.

Reinfeldt said the government wanted to be “responsible” and delay the measures in the interest of maintaining a healthy safety margin for public finances.

The measures to be postponed include a fifth-round of in-work tax credits (jobbskatteavdraget) and a plan to cut taxes for pensioners.

A planned raising of the income threshold for paying state income taxes will also be delayed.

According to the government's calculations, the tax breaks would have cost a total of 17.3 billion kronor ($2.68 billion).

Borg stated at the press conference that the costly tax reforms were simply too costly in light of the latest forecasts.

“If we had carried them out, we'd have come close to balance or had a clear deficit,” he said.

At the same time, Sweden's National Institute of Economic Research (Konjunkturinstitutet) cut its growth forecast for 2012 by 1 percent down to 2 percent.

According to the Institute, unemployment in Sweden will likely remain at 7.5 percent through the end of 2012.

“There continues to be valid reasons for changing both the in-work tax credit and the income threshold,” Borg said, but added that the coming autumn budget would be “significantly tighter” than previously indicated.

Problems in the European banking system will likely affect Sweden's economy, said Borg.

“We need to have safety margins for that,” he said.

He emphasised, however, that he thinks Sweden is well-equipped to maintain its economic stability.

Reinfeldt added that the Moderates' campaign promises had been divided up into “immediate” proposals, which would definitely be carried out and ambitions which were dependent on economic developments.

“We were clear with the voters about how we viewed the order of things,” he said.

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