Reduce the tax on labor, introduce a uniform VAT and a uniform taxation of capital income. This is proposed by economist Åsa Hansson in a new SNS report. Much has changed since the major tax reform of 1990–91. If the tax system is reformed on the basis of current conditions, she argues, Sweden can achieve higher growth and employment.
As a small country on the outskirts of Europe, Sweden must safeguard its competitiveness. Hence, taxes should not hamper work and economic growth. At the same time, they ought to facilitate moving toward environmental and social sustainability, according to Åsa Hansson in the SNS report “A Swedish Tax System for the 21st Century.”
“A more up-to-date tax system could address many of the problems we face in our current society,” says Åsa Hansson, associate professor of economics at Lund University.
In the report, which is part of the SNS project “Taxes in a Globalised World,” she presents several examples of possible reforms aimed at making the tax system more effective. These include lower taxation of labor at both the lower and upper ends of the income distribution, a uniform VAT at 25 percent as well as a uniform tax on capital income that also includes property tax.
In order to safeguard competitiveness, she also recommends that the corporate tax is reduced to a level that is lower than in large countries and that tax regulations are designed to encourage investments in entrepreneurship, research and development. Rather than offering detailed proposed reforms, Hansson wants to show how the process of taxation may be improved without resulting in worse public finances or a more unequal distribution of income and wealth in society.
“From an international perspective, Sweden has high taxes on labor, whereas less harmful taxes, such as taxes on property and consumption, are used to a lesser extent compared to other countries,” says Åsa Hansson.
Commissioned by SNS, the Swedish National Financial Management Authority has calculated the results of the proposals presented in the report if they were to be implemented. These results indicate higher employment, more hours worked and increased growth in the economy. According to Hansson, these calculations should be interpreted with caution, but they nevertheless offer a clear picture of what is possible. She points out how a new major tax reform could help strengthen Sweden’s economy and competitiveness while at the same time simplifying the tax system and making it more transparent.
“This is an opportunity that the people of Sweden should not miss,” says Åsa Hansson.
ABOUT THE RESEARCHER
Åsa Hansson is an associate professor of economics. After receiving her PhD in 2000, she has worked as a teacher and researcher at Lund University, the University of Copenhagen and the University of Massachusetts. She carries out research in public finances, mainly studying how taxes affect the behavior of individuals and companies. She was a member of the Swedish Fiscal Policy Council in 2018–2021 and was one of the authors of the SNS Economic Policy Council Report 2018.
ABOUT THE PROJECT
“Taxes in a Globalised World” is a research project carried out for three years under the guidance of SNS and focuses on the impact of globalization and technological developments on the tax system. The eighteenth and final seminar of this project will be held at the large tax conference organized by SNS between May 31 and June 1. Here, Åsa Hansson will present her new report. She has followed “Taxes in a Globalised World” since it was launched, and her analysis is partially based on the thirteen reports previously presented within the framework of the project.