Sweden to Halt Tax Cuts After Next Year to Buoy Public Finances

Swedes aren’t likely to enjoy further reductions in income taxes after next year until at least 2017, Finance Minister Anders Borg said, citing constraints on public finances.

The government of the largest Nordic economy should instead use the limited fiscal maneuvering room to strengthen education and create jobs, Borg told reporters today in Norrkoeping, Sweden.

“It’s not in the cards to make promises of big, broad tax cuts” in 2015 and 2016, Borg said. “It won’t happen until we have significantly better public finances and an economy that shows that we’re returning to a 1 percent surplus” of gross domestic product, he said.

Sweden’s government last month said it will cut income taxes for a fifth time next year since coming to power in 2006 to boost demand. It won’t reach its 1 percent of GDP surplus target until 2017 after stimulus measures depleted government coffers, the Finance Ministry said Sept. 18. Unemployment has risen in Sweden because of weak demand for its exports mainly from debt-stricken Europe. Sales abroad account for about half of Swedish output.

Sweden should still go ahead with more income-tax cuts once public finances improve since they encourage more people to join the labor force and work longer, Borg said.

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