Swedish Corporate Tax Proposal 2012

New Swedish corporate tax proposal; the Swedish Government proposes corporate tax to be reduced from the current 26.3 percent to 22 percent on 1 January 2013. Furthermore, the investment tax should be beneficial.

Many comments are excited, but the idea is completely wrong, according Small Companies Association (Småföretagarnas Riksförbund).

The reduction is expected to cost around 16 billion. Of these 8.8 billion financed by the tighter deduction rules for internal interest, called interest turbines.

– We do this because it will determine where the multinationals companies do invest, place factories and headquarters, says Swedish Minister for Enterprise Annie Lööf.

– Sweden is now below the average corporate tax rate for the OECD and the EU, EU average is now 23.4 percent.

Swedish Enterprise and Entrepreneurs has previously said that there are more effective measures. Lööf think, however, that tax cut is “just right” given that the OECD has pointed out tax to be the most harmful to the business environment and given that a number of EU countries have reduced their taxes in the past ten years.

The Government also proposes that an investor’s deduction to increase access to capital, especially in start-up and growing businesses.

– We believe that the moment we give the signal for this proposal; it will in various investment calculations fall out a Swedish flag more often than before. It will be more interesting to their future investments and taxation in Sweden, says Prime Minister Fredrik Reinfeldt.

– The tax proposal in its entirety is an injection of capital to the corporate sector. Corporate tax reduction along with our primary concern, investing deduction, creates a climate that is good for both small and large growing companies in Sweden, says Elisabeth Thand Ringqvist, president of Swedish Entrepreneurs (Företagarna).

But she has met opposition from the Small Companies Association:

– This is completely wrong. Reduced corporate tax will not affect unemployment in Sweden. Reduced corporate tax does not affect small businesses because it is still so small gains, says Leif Svensson, president of the Small Business Association.

– If you had used the money to a broad reduction in employer contributions and abolishing sick pay us less employed, it would have provided a direct effect on Swedish unemployment.

Lööf believe that it is not only the big international companies that will benefit from the Government’s proposals.

– The whole Swedish business sector benefits from corporate tax cuts, as there are many suppliers to large companies in Sweden, she says.

Reinfeldt says that it is incredibly difficult to calculate how employment will be affected by the reduction, and the government presented no calculations.

– It is never a straight line from one action to new jobs, because many things affect others. Some of this we do not have any power over in Sweden.

– We Social Democrats have always stood for a competitive corporation tax, so it is good that it is lowered, says Magdalena Andersson, Social Democrat spokesman for economic policy.

– But I have to see the Treasury’s aggregate calculations before I can really decide whether Sweden can afford such a large tax cut.

Krister Andersson, tax expert at the Confederation of Swedish Enterprise, welcomed the reduction, but warns of the design of the interest deduction rules. According to the proposal, which has been circulated for comments, and met with harsh criticism, the Swedish Tax Agency will have to decide whether an deduction should be approved or not.

– Businesses cannot know if they’ll get a deduction or not but must rely on the subjective judgment of the tax authorities. The legal uncertainty is completely unacceptable.

The government expects to bring in 2.5 billion more from the limitation of deductions for interest turbines than was previously announced; 8.8 billion instead of 6.3 billion.

– We have received additional material from the Inland Revenue to suggest that the problem of interest turbines have been more extensive and growing faster than we actually thought. It allows us to make a greater relief in the corporate tax rate, but also underlines how important it is to turn these interest turbines of, says Finance Minister Anders Borg.

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