Bloomberg News

Sweden to Cut Corporate Taxes to Attract Business, Create Jobs

September 13, 2012

Sweden will cut its corporate tax rate next year to 22 percent to attract business investment, create new jobs and prevent companies from leaving the the Nordic region’s biggest economy.

The government will spend about 16 billion kronor ($2.4 billion) to reduce the tax companies pay on profits, four years after cutting the rate to 26.3 percent from 28 percent in 2009, it said today.

“Corporate taxes are probably the most damaging tax of all,” Prime Minister Fredrik Reinfeldt said at a news conference in Stockholm.

The government said last month it will spend about 23 billion kronor on new initiatives next year after criticism from the Social Democrat-led opposition that it’s not using its strong fiscal position to stimulate growth and reduce unemployment in the $500 billion economy, whose exports to Europe remain at risk as the region’s debt crisis drags on.

Initiatives so far include increased spending on research and development, investments in roads and railways, and programs to reduce youth unemployment to boost the potential of the economy ahead of elections in 2014. About 8.8 billion kronor of the cost of the lower company taxes will be financed by reduced deduction allowances on internal corporate interest rate payments, the government said. The current average European Union corporate tax rate is 23.4 percent, it said.

Trailing Opposition

The four-party government coalition is trailing the opposition in polls half way through its current term, even after reducing Sweden’s debt ratio every year since 2009, to 35.6 percent of gross domestic product this year, the European Commission estimates. That compares with an average burden of 91.8 percent in the 17-member euro area in 2012, according to the commission.

Sweden, home to companies such as Ericsson AB (ERICB), the biggest mobile systems maker, and Volvo AB (VOLVB), the second-largest truck maker, will post a 0.3 percent budget deficit this year, widening to 0.5 percent 2013, the government said last month. The economy will grow 1.6 percent in 2012 and 2.7 percent in 2013 even as Sweden exports about half of its output. About 70 percent of that goes to Europe, where governments are cutting spending to reduce debt.

Today’s proposal also included an individual tax break of as much as 200,000 kronor for investors in new companies or new financing of existing companies.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net


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