1. THE SWEDISH TAX
SYSTEM
Dr Erik Norrman
Department of Economics
School of Economics and Management

2. Contents
 A global view
 The structure of the Swedish tax system
 Collection, filing and control system
 Challenges
Erik Norrman - School of Economics and Management 2

3. The Swedish Tax System
- a Global View…
Erik Norrman - School of Economics and Management 3

4. GDP of Sweden in 2002
Billions per capita per capita PPP
GDP ($) 240 $24,700 $26,000
GDP SEK 2339
Public sector: %
Revenues 1195 51
Taxes 854 37
Social security contributions 341 15
Expenditures 1240 53
Transfers 584 25
Public consumption 656 28
Source: Tax Statistical Yearbook
Erik Norrman - School of Economics and Management 4

5. Total tax revenues in Sweden, EU
and OECD, 1966-2000, % of GDP
Erik Norrman - School of Economics and Management 5

6. Taxes classified according to national accounts, 2001
Sweden EU
Indirect taxes 16,9 14,0
VAT 9,0 7,0
Excise duties 3,2 2,5
Other 4,7 4,5
Direct taxes 22,3 14,0
Individuals 17,6 10,1
Legal entities 3,7 2,6
Other 1,0 1,3
Social security 14,9 13,1
Employer´s contribution 11,6 7,4
General social security contributions 3,0 4,2
Self employes 0,3 1,5
Total 54,1 41,2
Source: Eurostat 2003
Erik Norrman - School of Economics and Management 6

7. Taxes by receiving administrative level
percent of all taxes, 2001
70,0
60,0
50,0
Sweden
EU 15
40,0
%
30,0
20,0
10,0
0,0
Central government State government Local government Social security funds EU institutions
Erik Norrman - School of Economics and Management 7

8. Tax bases in OECD countries
Source: OECD Revenue Statistics in Member Countries 1999
United Kingdom
Switzerland
Sweden
Norway
Netherlands
Italy
Germany
France
Finland
Denmark
Belgium
Austria
Japan
Australia
United States
Canada
0% 20% 40% 60% 80% 100%
Operating surplus for Spain does only include corporate profits
Consumption Labor Operating surplus
Erik Norrman - School of Economics and Management 8

9. Deviation from average effective tax rate on labor (1999)
Source : European Economy EC Commission 2000
20,0
15,0
10,0
5,0
%-points
0,0
y
y
K
al
en
d
nd
in
a
g
e
um
s
e
k
l
an
nd
ar
n
ec
ur
ri
nc
U
Ita
g
a
ed
la
la
st
tu
Sp
gi
m
bo
m
rla
re
a
Ire
n
Au
r
l
Fr
Sw
en
Be
er
Fi
Po
G
m
he
G
D
xe
et
-5,0
Lu
N
-10,0
-15,0
Erik Norrman - School of Economics and Management 9

10. Deviation from average effective tax rate on capital (1999)
Source: European Economy EC Commission 2000
15,0
10,0
5,0
%-points
0,0
y
y
K
nd
en
al
nd
a
in
um
g
e
e
s
k
l
an
nd
ar
ec
ri
nc
ur
U
Ita
g
a
la
ed
la
st
tu
Sp
gi
m
bo
m
re
rla
a
n
Au
Ire
r
l
Fr
Sw
en
Be
er
Fi
Po
G
m
he
G
D
xe
et
Lu
N
-5,0
-10,0
Erik Norrman - School of Economics and Management 10

11. Deviation from average effective tax rate on consumption (1999)
Source: European Economy EC Commission 2000
10,0
8,0
6,0
4,0
%-points
2,0
0,0
K
ly
ain
en
e
ce
y
nd
d
ia
um
k
l
g
ga
ds
U
an
ec
ar
Ita
lan
str
ur
an
ed
nla
Sp
lan
rtu
nm
lgi
re
m
bo
Au
Ire
Fr
Sw
Be
Fi
G
er
Po
er
m
De
G
-2,0
th
xe
Ne
Lu
-4,0
-6,0
Erik Norrman - School of Economics and Management 11

12. The Structure of the
Swedish Tax System…
 The Personal Income Tax
 Social Security Contributions
 The Corporate Income Tax
 Real Estate Taxation
 Wealth Taxation
 Indirect Taxation
 Transaction Taxes
Erik Norrman - School of Economics and Management 12

13. Taxes in percent of GDP
Social security
Indirect taxes
Direct taxes
Erik Norrman - School of Economics and Management 13

14. Taxation in Sweden year 2002, BSEK
300
Taxes on labor
Taxes on capital
118 Taxes on goods and
757 services
26%
10%
64%
Erik Norrman - School of Economics and Management 14

15. Erik Norrman - School of Economics and Management 15

16. The Personal Income Tax
 National tax on earned income
- progressive
 Local tax on earned income
- proportional
 National tax on capital income
- proportional
 World-wide basis applies
Erik Norrman - School of Economics and Management 16

17. The Dual Income Tax
Paid on income shares
60%
above $40,000
50%
National tax on capital
40% income
National tax on earned
30%
income
20% Local tax on earned
income
10%
0%
Earned income Capital income
Erik Norrman - School of Economics and Management 17

18. Earned Income
 Income from employment
- wage income
- benefits in kind assessed at market value
 Income from business activities
- as self-employed
- as a partner in a partnership
Erik Norrman - School of Economics and Management 18

19. Family Taxation
 Spouses as well as children are taxed
separately for all income
 No spouse allowances
 No children allowances
Erik Norrman - School of Economics and Management 19

20. Deductions
 No standard deductions
 Itemised expenditures exceeding
SEK 1,000 may be deducted
 Commuting expenses exceeding
SEK 7,000 may be deducted
 Pension contributions up to
SEK 19,000 is deductible
Erik Norrman - School of Economics and Management 20

21. Capital Income
+ Interest payments received
+ Dividends received
+ Capital gains realised during the year
- Interest expenses deductible
= Capital income
Erik Norrman - School of Economics and Management 21

22. Erik Norrman - School of Economics and Management 22

23. Social Security Contributions
 Employer´s contributions
(pension, health, on the job accidence etc)
33 percent
 Additional negotiated pension fees
 Employee pension contribution
7 percent (75% of fee is credited against
income tax)
Erik Norrman - School of Economics and Management 23

24. The Corporate Income Tax
 Tax rate 28 percent
 Classical double taxation
 Special rules apply to closely held
companies
 Inter-company dividends tax-exempt as
well as capital gains on unlisted companies
Erik Norrman - School of Economics and Management 24

25. Institutional Investment
 Life-insurance companies and Pension
funds are taxed on a notional basis
 Mutual funds and investment companies
pay taxes on net interest and dividends
received. Capital gains are tax exempt but
a notional return is calculated (1,5%-2,0%)
Erik Norrman - School of Economics and Management 25

26. Real Estate
 Owner-occupied houses:
1,0% of an assessed value equal to 75%
of the market value is paid as property
tax
 Other real estate:
0,5% of an assessed value
Erik Norrman - School of Economics and Management 26

27. Other Capital Taxes
 Net wealth tax
1% of the value above
- 1,5 MSEK for individuals and
- 2,0 MSEK for spouses
 No tax on ”working capital” in unlisted firms or
OTC-stocks
 Inheritance and gift taxes
Erik Norrman - School of Economics and Management 27

28. Indirect Taxation - VAT
 The tax base is harmonised within the EU
 Tax exempt services are:
- Medicare
- Public education
- Social care
- Financial intermediation
- Insurances
Erik Norrman - School of Economics and Management 28

29. VAT - Rates
 Normal rate 25% (exclusive basis)
 Cultural activities, books and newspapers 6%
 Personal transportation and foodstuff 12%
Erik Norrman - School of Economics and Management 29

30. Excise Duties
 Alcohol
 Tobacco
 Energy
Erik Norrman - School of Economics and Management 30

31. Transaction Taxes
 On purchase of real estate
- individuals 1,5% of acquisition value
- legal entities 3,0% of acquisition value
 Stamp duty on collaterals for mortgage
loans 2%
Erik Norrman - School of Economics and Management 31

32. Collection of Income Taxes - Individuals
Income year Year of assessment
1. 2. 3. 4. 5.
1. Preliminary income tax on wage and is withheld by
employer each month during the income year
2. The next month the employer pays the withheld amount to
the Tax Administration
3. In January (the assessment year) information is sent to the
Tax Administration including total income and tax
withheld for each individual
4. Filing by individual
5. Final tax is calculated and sent to individual. Preliminary
tax is deducted

33. Collection of Income Taxes - Firms
Income year Year of assessment
1. 2. 3.
1. Preliminary income tax based on last years profit or an
expected profit is paid each month to the Tax
Administration
2. Filing by company/individual for business activity
3. Final tax is calculated and sent to company/individual.
Preliminary tax is deducted
Erik Norrman - School of Economics and Management 33

34. Collection of VAT
+ Value added taxes on sales
- Value added taxes on purchases
= Amount to be paid or repaid
Payments are made in March for VAT
in January and so on
Erik Norrman - School of Economics and Management 34

35. Employers set up one declaration for all taxes
Collection Month: May 2004 Company name: Firm AB
Registratio no: 556123-4567
Social security Value Added Taxes
Wage sum 1,000,000 VAT on sales 25% + 2,500,000
Fees 33% 330,000 VAT on sales 12% + 0
VAT on sales 6% + 0
Withheld income taxes VAT on purchases EU + 0
Sum of taxes 295,000 VAT on purchases - 900,000
Amount to pay = 1,600,000
Specification of sales
Within Sweden 10,000,000
Tax exempt sales 0
Exports 250,000
Total amount to pay: 2,225,000 EU goods 700,000
EU Services 0

36. Tax Accounts
 Each individual and each company
has a separate tax account
 All taxes are debited the account
 All payments are credited the account
 A positive balance is paid out to the
holder of the account
Erik Norrman - School of Economics and Management 36

37. Challenges in the Future
- Short Term Perspective (1-5 years)
 Domestic distortions
- Labor supply of low-income individuals
- Problems with the Dual Income Tax
 International tax competition
- Mobile tax bases (firms, financial capital and well-
educated labor)
- Cross-border shopping
 Compliance
- Black market activities
- International tax evasion

38. Challenges in the Future
- Long-run Perspective (5 years -)
 Demographic development causes pressure on
expenditures
 Demographic development unfavorable for tax
base expansion
 What kind of tax structure sustains economic
growth?
Erik Norrman - School of Economics and Management 38