Sweden is lowering corporate tax for the third time since 2009, now to 20% (see SPR 20/6 Early Ed.). However the Moderates are calling it a tax rise on the sly.
Finance Minister Magdalena Andersson wrote in a Dagens Industri (DI) debate article yesterday that the lower tax will be compensated for by limits to interest deductions.
The Moderates have welcomed the limits to the tax deduction, which aims to stop companies’ aggressive tax planning, although. Maria Malmer Stenergard, tax policy spokesperson for the Moderates, would have liked a larger cut in corporate tax as compensation.
Meanwhile the Confederation of Swedish Enterprise (Svenskt Näringsliv) welcomes the tax decrease but is critical of limiting the right to a tax deduction.
Today the Ministry of Finance is putting out a memorandum on new tax for the corporate sector, write Finance Minister Magdalena Andersson and deputy Finance Minister Per Bolund in Dagens Industri (DI).
It proposes a general rule for limiting tax deductions for interest in the corporate sector in order to increase tax neutrality between different forms of financing. The memorandum also includes other proposals such as new tax rules for financial leasing, new hybrid rules, and a primary deduction for rental properties. Additionally, the current interest rate deduction rules are to be tightened. The proposals are fully financed and are proposed to come into force on 1 July 2018.
As limiting the tax deduction for interest means that the tax regulations are tighter, it is proposed that companies are compensated by lowering corporate tax from 22 to 20 per cent. This lower rate is fully financed by tightening the other rule. Thus the proposal is a redistribution of total tax within business.
The proposal is out for consultation before the government makes a final decision.