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Will there be another tax reform?

2017-01-25


Magnus Henrekson, IFN, and Åsa Hansson, Lund University and affiliated to IFN, spoke on Wednesday at a seminar in Swedish Parliament. The Tax Committee had gathered Swedish tax experts to discuss "tax reform 25 years – its history and future." Two former ministers opened the seminar: Erik Åsbrink and Bo Lundgren. Followed by Magnus Henrekson who explained how taxation is linked to entrepreneurship and growth. Åsa Hansson sorted out the concepts of uniform and optimal taxation.

“Growth is a combination of knowledge, innovations and entrepreneurship which give us new growing companies,” said Magnus Henrekson at the seminar in parliament.

He explained that the tax system is crucial for an ecosystem that is favorable to entrepreneurship.
“The current system is beneficial to those who found a company and for asset managers. They have low or no tax. But not for key employees recruited to start-ups – individuals that are necessary for the company to grow and prosper. These employees have a tax wedge of 65-70 percent.”

Magnus Henrekson said that today it is not possible to share the future ownership in a tax efficient way, with all necessary stakeholders And this means that not enough capital will be invested in the entrepreneurial sector. It is about "creating conditions for venture capital to form effective agreements with contractors and other individuals with key skills". In other words, employee stockoptions.
“You for granted that the biggest risk is endured by financial investors, but that is not true. The biggest risk is taken by an employee that leave a well-paying job to join a start-up. In order to work five, six years in a company which may succeed or fail ...,” said Magnus Henrekson.

 

2017-01-25 Magnus Henrekson.jpg
 Magnus Henrekson in parliament.
 

Åsa Hansson spoke of uniform (neutral) tax systems compared to optimal tax systems. She explained that many of the deviations, made from the dual tax system that was implemented in 1991, was done with the goal to form optimal taxation. For example, the earned income tax credit, Rot/Rut and corporate tax cuts.
“Tax competition between countries has increased the tax base mobility. Thus, today we have a trend toward optimal taxation,” said Hansson.
She concluded with some assumptions from research studies:

• Tax broad tax bases with low tax rates! (as the Swedish tax reform of 1990/91).

• Uniform taxation has many advantages: simple, transparent and you might avoid boundary complications.

• With increasing international competition must also take into account international neutrality.

• If the external effects affect consumption or production, you should abandon uniform taxes.

• Radical tax reforms are being discussed , in favor of more consumption-based taxation.

 


 
2017-01-25 Åsa Hansson2.jpgÅsa Hansson spoke about trends in taxation policy.
 
2017-01-25 Erik Åsbrink.jpgFormer Finance Minister Erik Åsbrink (S) told about how the tax reform of 1991 came about. He said that the current taxation of working capital is inefficient and unfair.
 
2017-01-25 Bo Lundgren.jpgFormer Treasury Secretary Bo Lundgren (M) declared that the times and the conditions changed a lot in 25 years. He, like many other economists want to reinstate the property tax.

 

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