Bank avoid­ing zero in­ter­est boost Swedish bud­get cof­fers

The Pak Banker - - COMPANIES/BOSS -

On the sur­face, Swe­den's bud­get bal­ance is im­prov­ing quickly be­cause of higher-thanex­pected tax in­come. But dig­ging deeper, part of the in­flow could be a re­sult of house­holds and com­pa­nies tak­ing ad­van­tage of higher in­ter­est on sav­ings at the tax au­thor­ity than the zero or neg­a­tive in­ter­est of­fered at the big­gest banks.

Swe­den posted a bud­get sur­plus of al­most 17 bil­lion kro­nor ($2 bil­lion) in Jan­uary, when the Swedish Na­tional Debt Of­fice had fore­cast a deficit of 6 bil­lion kro­nor. Tax in­come was about 18 bil­lion kro­nor higher than fore­cast, "pri­mar­ily due to in­creased pay­ments of pre­lim­i­nary taxes con­cern­ing 2015," it said Fri­day. Its "as­sess­ment is that part of th­ese are non-re­cur­ring."

The in­crease in pre­lim­i­nary taxes prob­a­bly stems from the fact that ac­counts at the Swedish Tax Agency of­fer in­ter­est of 0.56 per­cent, which is "very at­trac­tive given the al­ter­na­tives," Michael Grahn, an an­a­lyst at Danske Bank A/S in Stock­holm, said. "This may of course re­verse at some stage."

Swedes can't ex­pect to get much, or any, in­ter­est on tra­di­tional sav­ings ac­counts at the largest banks af­ter the Riks­bank low­ered rates well below zero last year. As the banks have to pay to de­posit ex­cess cash overnight at the cen­tral bank, they have cut in­ter­est on sav­ings to or close to zero to try to limit costs, while re­frain­ing from charg­ing clients for de­posits. Some large com­pa­nies have to pay to de­posit cash at some banks. "We can't say that there are many who use their tax ac­counts as sav­ings ac­counts, but there may be some," said Mag­nus Wallin, head of a unit at the busi­ness depart­ment at the tax agency.

While the agency doesn't have any in­di­ca­tions that it's sys­tem­atic, they are look­ing into that pos­si­bil­ity in or­der to pro­vide cor­rect in­for­ma­tion to fore­cast­ing au­thor­i­ties such as the debt of­fice, Wallin said. The Jan­uary num­bers were af­fected by one-off ef­fects, a large com­pany trans­ac­tion, and the ris­ing de­posits in tax ac­counts also match up with larger prof­its for busi­nesses and in the hous­ing mar­ket, Wallin said.

Thomas Olof­s­son, head of debt man­age­ment at the debt of­fice, also said that they "can't ex­clude" that peo­ple are plac­ing their money at the tax of­fice to get a higher in­ter­est rate.

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