Banks in Sweden face a package of new taxes as the government reveals plans to levy several corners of the country’s financial industry.
A proposal to abolish tax deductions on interest on subordinated loans, put forward in an op-ed in local media on Wednesday, probably won’t stand alone, Finance Minister Magdalena Andersson told Bloomberg. The government will continue to look at a potential “financial activity” tax, she said, referring to a plan first presented last year.
“Both can potentially be introduced, absolutely,” Andersson said.
The government, which has struggled to keep its finances in check amid an historic influx of refugees, says the measures will help fund education, healthcare and job creation. The proposal to abolish interest deductions on subordinated loans alone, which will also target non-life insurers, would raise 1.4 billion kronor ($171 million) annually in additional revenue and already has the backing of the government’s Left Party ally.
Sweden’s banks can afford the extra cost because they’re “doing very well and we see that they make large profits,” Andersson said by phone. The measures would help add stability to the financial system, she said.
The Swedish Bankers’ Association responded by criticizing what it said risked turning into “a patchwork quilt of tax rules that are difficult to understand and that are not well thought through in relation to capital requirements and crisis handling of banks.”
The proposal, which would take effect in 2017, would result in the same tax rules being applied to subordinated loans that currently cover banks’ equity and means the “tax system won’t affect the choice between equity and subordinated loans,” Andersson said in the op-ed published in Aftonbladet. The measure will also give financial firms an incentive to build their resilience against future headwinds, she said.
Sweden said last spring a tax on “financial activity” would take the form of either increased payroll taxes or taxing bank revenue. The plan replaced a 2014 proposal that risked colliding with European Union competition rules. The spring proposal met with considerable opposition from Sweden’s biggest banks, with Bjoern Wahlroos, the chairman of Nordea Bank AB, threatening that lenders could move some operations abroad if the government went ahead.
The Bankers’ Association said the latest proposal would ultimately make it more expensive to build protective capital buffers and questioned Andersson’s suggestion that the financial industry was making lots of money.