Swedish government pulls tax increase plans to avert crisis

STOCKHOLM: Sweden’s minority government withdrew two contested tax increase proposals to avert potential no-confidence motions and get a budget passed before next year’s election.

The Social Democratic-led government on Saturday said it won’t go ahead with a plan to make more people pay state income tax and also backed off raising taxes on small business through changes to the so-called 3:12 rules.

These measures would have raised about four billion kronor (US$502mil) annually.

The four-party opposition had threatened to call no-confidence motions if action on the tax increases had proceeded.

The plans were abandoned amid solid economic growth and budget surpluses.

The government this week announced it would have about 40 billion kronor to enact reforms as steady growth and falling unemployment fills state coffers.

“We stand firm that these plans would have contributed to decreasing inequality,” Finance Minister Magdalena Andersson said on Saturday at a press conference in Stockholm.

The government doesn’t want to contribute to a “circus” in parliament, she said.

Plans to push through a new tax on airline travel – to cut emissions tied to climate change – remain in place though the government adjusted its original proposal.

Regional airports will now be offered compensation to limit the impact and the government also lowered the tax to 60 kronor, 250 kronor and 400 kronor, depending on distance.

Climate change is humanity’s most pressing challenge, Isabella Lovin, deputy prime minister and climate minister, said at the press conference.