In relation to other similar countries Sweden has higher taxes on labour, in terms of taxation at lower income levels and in terms of top marginal tax rate. What is noticeably different in Sweden is the general wage fee (allmänna löneavgiften), i.e. the labour tax paid by the employer that is not related to social benefits. Attention is drawn to this by the National Institute of Economic Research (Konjunkturinstitutet) in a report commissioned by SNS.
The report Swedish Taxes in International Comparison compares developments in tax bases and the tax structure over a longer period of time. Since the end of the 1990s, Sweden has lowered the tax on labour by almost 5 per cent of GDP, but in an international comparison taxes on labour are still high. The tax on labour takes the form of direct taxes, namely state and municipal income taxes, and indirect taxes, such as employers’ social security contributions.
Another area where Sweden stands out, but in the opposite direction, is in its comparatively low revenue from tax on property. Tax on inheritance and gifts as well as on wealth has been abolished, and revenue from the real estate tax has diminished. The result is that the overall level of property taxation in Sweden is now about 1 per cent of GDP, which may be compared with 2.3 per cent in the EU-15.
The report also shows that the tax bases for some excise duties within environmental and energy taxation have developed slowly.
– The main purpose of environmental taxation is to steer people away from consumption that is harmful for the climate and the environment. The effect of this is that higher levels of environmental tax will gradually reduce tax bases, so that tax revenue will be less as time passes. This effect should be considered when planning, e.g., to change from labour taxes to environmental taxes, says Urban Hansson Brusewitz, Director General of the National Institute of Economic Research.
An international trend is to cut corporate tax rates, but at the same time tax bases are being broadened, which has resulted in stable government revenue. Sweden’s corporate tax rate and revenue from corporate taxation are broadly in line with those in other countries.
Altogether, the National Institute of Economic Research notes that in comparison with many other countries Sweden has rather high revenue from taxation, but that the difference between Sweden and the OECD and the EU average has declined during the past twenty years.
– In a more globalised world in which capital and labour move across borders, it is important not only to compare tax revenue historically within a country, but also to compare it with other similar countries, says Urban Hansson Brusewitz.
The report is part of the SNS research project Taxes in a Globalised World.