New tax cuts mean that almost everyone, rich and poor, will get around 100-200 kronor more a month next year, as the state borrows money to encourage Swedes to help get the country's wheels spinning again in the wake of the coronavirus crisis – by consuming and spending more.
But will the strategy work? Not everyone is convinced.
“The question is whether household spending power is what needs the boost,” Jens Magnusson, economist at banking giant SEB, told the TT news agency.
Sweden did not go into a hard lockdown as many other countries did when the pandemic hit this spring. But advice to avoid close contacts and work from home if possible, as well as the risk of a global financial crisis, made consumers change their behaviour and put more money into savings.
There is a risk that that trend continues despite the tax cuts, which would then miss the point. On the other hand, the tax cuts are mainly aimed at people who would be more likely to spend some of the extra money compared to high earners, because it would on the whole make a bigger difference to their wallets.
“Most of the money for households will go to people on low and medium incomes, who are highly likely to spend the money on increased consumption,” said Swedbank economist Arturo Arques.
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People who have lost their job will also get to keep the higher unemployment insurance rolled out at the peak of the pandemic for another two years, and will benefit to some extent from the tax cuts.
Pensioners are another group of budget winners. Increased pensions and lower taxes mean people who are drawing a pension in Sweden will get to keep up to 400-500 kronor more a month.
But the big winners are people who have sold a house for a profit and have postponed their capital gains tax, which you can do indefinitely as long as you use the proceeds to buy a new home in the EU/EEA. The annual fee, a kind of equivalent of an interest rate, for that will be scrapped at the end of the year.
Around 600,000 people today have deferred profits that amount to on average half a million kronor, and according to Swedbank's calculations they will effectively get a tax cut of 2,500 kronor a year starting next year. But in some areas of Sweden, for example Stockholm where property prices are high, we could be talking about up to around 10,000 kronor's worth of savings in a year.
THE LOCAL EXPLAINS:
There are few things in the 2021 budget bill that will immediately make life more expensive for households in Sweden, writes TT. As The Local reports, taxes on alcohol and tobacco are set to be hiked in order to help fund Sweden's military defence, but that will not come into effect until 2023. Read more about the 2021 budget here.
tax – (en) skatt
100-kronor note – (en) hundralapp
household – (ett) hushåll
wallet – (en) plånbok
property – (en) bostad