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Tax changes could cut costs for Swedish firms

UPDATED: Swedish Enterprise and Innovation Minister Mikael Damberg has told The Local about his action plan to turn Stockholm into the top startup city in the world. But critics of his proposals say they are too vague.

Tax changes could cut costs for Swedish firms
Sweden is home to many of the world's successful startups, such as Spotify. Photo: Lars Pehrson/TT

Startups have long argued that they struggle to attract key workers because of Sweden's comparatively high taxes on employee stock options which are used to pay staff in early days when cash is tight.

“Small startups which take big risks, which could go bust within a couple of years, need to be able to recruit good people. If you want to recruit someone from Ericsson or somewhere who has a high salary and you’re asking them to take a big risk and a pay cut, they need to get something else. They need to be able to share in the success if it goes well,” Mathias Sundin, who represents the Liberal Party – one of the four centre-right parties that make up Sweden's opposition Alliance group – told The Local on Wednesday.

However, profits from the stock options are currently taxed highly in Sweden, at a rate of 68 percent. This puts the Nordic nation miles behind the Silicon Valley-style location that many want Stockholm want to be; the corresponding figure from the US start-up hub is 15 percent.

But on Wednesday, Enterprise and Innovation Minister Mikael Damberg of the ruling Social Democrat-Green coalition spoke at Stockholm Tech Fest 2015 on and announced a government inquiry to review Sweden's strategy – which could potentially see the fees cut after its findings are presented in March next year.

“This is one of the first questions that companies raise with me today, as they don't have enough money to pay very talented people the salaries they need,” Damberg told The Local just after his presentation.

”But it shouldn't open up for some sort of tax planning, where people don't pay tax. The start-up scene has to pay its share of tax,” he added.


Enterprise and Innovation Minister Mikael Damberg. Photo: Marcus Ericsson/TT

Mathias Sundin, who sparked global headlines when he ran for parliament in September using only Bitcoin to fund his campaign, said welcomed Damberg's plans but added that they were too vague. He advocates taxing options schemes as capital gains at 25 percent and told The Local he would have liked to see concrete proposals to that effect.

”It would have been very much better if he had [said] 'we're going to do something about this. We'll sort this.' [Damberg's statement] is a good signal, but not more than that,” he said.

Damberg's comments come on the final day of Stockholm Tech Fest 2015 where hundreds of startups have gathered to discuss investment strategies and technology over the course of two days.

Stockholm is home to seven of the world's 78 start-up firms valued at more than one billion dollars. But a severe housing shortage in the capital is making it increasingly difficult for many companies to recruit international talent – simply because they have nowhere to live.

GUIDE: How to navigate Sweden's crazy rental market

“It's a really difficult situation, as we have a housing crisis in Sweden and have had for several years, as not enough has been built in Stockholm. My long-term answer is that we need to get house-building to increase. There's no other easy answer,” said Damberg.

”But in the short term people just wing it. You try to find friends and live together or you work with your company to find some kind of arrangement where you buy an apartment together. But it's very complicated.”

ABB

Swedish engineering giant ABB to quit Russia over Ukraine

Swedish-Swiss engineering giant ABB said on Thursday it will quit Russia as a result of the war in Ukraine and the related international sanctions against Moscow.

Swedish engineering giant ABB to quit Russia over Ukraine

Russia accounts for only one or two percent of ABB’s overall annual turnover and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

“ABB has decided to exit the Russian market due to the ongoing war in Ukraine and impact of related international sanctions,” the group said in a statement.

Russia accounts for only one or two percent of ABB’s overall annual sales and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

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A large number of major western companies have pulled out of Russia since Moscow invaded its pro-Western neighbour on February 24.

“When the war broke out, ABB stopped taking new orders in Russia,” the group said.

At the same time, it said it continued to fulfill “a small number of existing contractual obligations with local customers, in compliance with applicable sanctions.”

Most of ABB’s dedicated Russian workforce has been on leave since March “and the company will do its best to support them as it realigns its operations in a controlled manner,” it said.

ABB has about 750 people in Russia and two production sites in the country located in the Moscow region and Lipetsk, as well as several service centres.

Separately, the group said that its net profit fell by 50 percent to $379 million in the second quarter, largely as a result of one-off charges, but also the cost of withdrawing from Russia.

Sales, on the other hand, grew by six percent to $7.2 billion in the period from April to June, ABB said.

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