Sweden Ready to Adjust Bank-Tax Plan After Barrage of Criticismby and
Minister in charge says he’s taking criticism ‘very seriously’
Government says a bank tax will help finance Swedish welfare
The minister in charge of Sweden’s bank laws responded to massive criticism of a planned financial tax, signaling the government is ready to make adjustments before putting forward a final proposal.
“You can’t deny that there’s been a lot of criticism against this proposal and we of course take that very seriously,” Per Bolund, Sweden’s financial markets minister, said in a brief interview on Tuesday, after Bloomberg News reported that the country’s competition watchdog characterized the planned levy as problematic in its current form.
It wouldn’t “be the first time in history that proposals that we send out on referral change during the course of the journey and that we end up with a different model,” Bolund said.
According to a consultation response obtained by Bloomberg on Monday, the Swedish Competition Authority is warning the government that a proposed 15 percent tax on payrolls risks putting banks and insurers at a competitive disadvantage compared with their peers outside Sweden. The document, which follows a proposal in a government-initiated review, also makes clear the tax could distort competition between large and small firms.
The planned levy has drawn a barrage of complaints from high-profile bankers, with Nordea Bank AB Chairman Bjorn Wahlroos warning it may lead some firms to move parts of their business outside Sweden. The industry says the tax would put about 16,000 jobs at risk, or roughly one-fifth of the country’s financial industry jobs.
The Social Democrat-led coalition wants to use the additional revenue to help pay for Sweden’s fabled welfare system. The government has so far called industry warnings alarmist and argued that banks are profitable enough to be able to afford the extra tax.
But on Tuesday, Bolund signaled the administration was listening to concerns voiced by the competition authority. “Exactly what we conclude is too early to say,” he said. “But I can guarantee that we will take the views in the responses into consideration.”
Even the authority tasked with collecting the money raised -- the Swedish Tax Agency -- thinks the proposal should be reconsidered. The agency estimates the proposed payroll tax will affect more than 300,000 financial-industry companies, including e-commerce firms and corporations offering their own insurance services. Critics of the proposal have also warned there’s a risk it will lead to closures of bank branches and higher costs for customers.
The Swedish Bar Association also opposes the tax, as do industrial giants with their own in-house insurance operations such as bearings maker SKF AB. All four opposition parties in Sweden’s parliament are against the proposal.
“If there’s extreme pressure from the consultative bodies so they can show that this will create big problems,” then the government “may not do it,” Magnus Henrekson, managing director at Sweden’s Research Institute of Industrial Economics, said by phone after Bloomberg reported the competition authority’s criticism.
“It feels like a strange tax,” Henrekson said. “If one thinks that profits are too high in the financial sector, there are other ways to facilitate competition.”
But the proposal also has some vocal backers, including the Swedish Trade Union Confederation and the Swedish National Pensioners’ Organization. Last week, the finance minister said improved results reported by Nordea, among others, support the government’s plan to proceed with the tax.
“Swedish banks are making a lot of money and that shows that there is room to introduce a bank tax,” Finance Minister Magdalena Andersson said on Feb. 2. “There are big needs in the welfare sector and some money could move from the big banks to the school desks.” Her office declined a request for comment on the competition authority’s criticism.