Sweden Drops Two Planned Tax Hikes

Sweden’s center-left coalition said it would drop two of three planned tax hikes in its 2018 budget, but still plans to introduce an airline tax, confirming media reports earlier this week.

On Monday, daily Expressen said the government had agreed with the Left Party, whose support it relies on in parliament, to withdraw plans for changes to tax rules for small companies and a measure to increase the number of people paying state income tax, Reuters reported.

The center-right opposition has threatened a vote of no-confidence in a number of government ministers if the minority coalition did not abandon its proposals to raise taxes.

Its usually stable bloc politics has been thrown into turmoil in recent years with the rise of the anti-immigration Sweden Democrats. Neither the center-left nor center-right is able to form a majority government without them.

“We still believe that these are proposals that could have contributed to even out gaps (in society),” Finance Minister Magdalena Andersson told a news conference.

“But given the current circus in parliament we have decided to withdraw those proposals.”

The government still plans to introduce an airline tax, albeit a modified version of what was originally planned.

Sweden’s next election will be held on September 9, 2018.

Sweden’s center-left coalition plans to use bulging public coffers to spend billions more on teachers, nurses and police ahead of next year’s election.

While much of Europe is emerging from a period of austerity, Sweden has enjoyed years of strong growth, falling unemployment and rising household incomes, not to mention undiminished welfare benefits such as extended parental leave.

“Sweden’s economy is booming,” Andersson told reporters on Thursday. “The results of that should benefit everyone.” Boosted by a record low benchmark repo rate, the government said it expected the economy to expand 3.1% this year and 2.5% in 2018, both upward revisions from earlier estimates. Growth was 3.2% in 2016.

Andersson said unemployment would fall to 5.9% next year as the government invested in job growth. It would continue to pay down debt, already among the lowest in the European Union.

Many European countries would be envious of such conditions, but Swedes are worried about declining school results, shortages of teachers and medics and the record numbers of migrants who have arrived in recent years in need of housing and jobs.

Andersson said the strong economy and tight budgets since taking power in 2014 meant the minority coalition of Social Democrats and Greens could spend an extra 40 billion crowns ($5.01 billion) next year, when Swedes go to the polls.