Prime Minister Stefan Löfven is to begin a three-day trip to China next week, including a meeting with Chinese Prime Minister Li Keqiang, accompanied by Enterprise Minister Mikael Damberg, Trade Minister Ann Linde and Environment Minister Karolina Skog, along with a business delegation that includes Ericsson, ABB, Astra Zeneca, Scania and Volvo Cars and Volvo Group.
Sweden’s exports to China amounted to SKr 46 billion in 2016. During the first quarter this year exports grew by 33%, compared to the same period last year.
Mikael Damberg says that China’s efforts to move forward on the global political arena in terms of trade and climate makes it easier to find a shared agenda.
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.
After almost five months in the White House, Donald Trump’s trade policy is still unclear. This uncertainty is affecting Swedish export companies.
“The only concrete things we have seen is that he wants to renegotiate the North American free trade agreement Nafta, and that he has withdrawn the USA from TPP, the deal with Asia. We do not know more than this,” says Anna Stellinger, director general for the National Board of Trade. She continues, “Uncertainty is never positive. Not for trade and not for companies that want to invest.”
Anna Stellinger points out how important a market the USA is for Swedish companies. The board has calculated that 139,000 Swedish jobs are linked to Swedish exports to the USA.
With France and Germany pushing for closer cooperation, the European Commission has outlined five scenarios for the future of the EU post-Brexit. Sweden has remained remarkably quiet about the white paper, but at lunchtime today the Commission is to release a report that has the potential to change this.
According a rumour in the German media last week, pressure will be put on Sweden to adopt the euro no later than 2025. The European Commission has denied that this is the case, but Roberg Bergqvist, chief economist at SEB, believes there is a grain of truth in the rumour.
Finance Minister Magdalena Andersson (S) is defiant, saying she will not accept a specific date. “It is up to the people of Sweden … to decide if and when Sweden adopts the euro. There is no other alternative,” remarks the minister, believing that there is understanding in the EU for this stance post-Brexit.
Sweden risks a disorderly housing market correction, warns the European Commission in its annual review of the Swedish economy, reports Reuters. The risk comes from persistent house price growth and that the policy implemented by Swedish authorities has not been sufficient.
The Commission wants to see housing tax reforms, steps to increase the rate of new housing construction and deregulation that leads to a more effective use of existing housing stocks. The Commission recommends gradually lowering the tax deductibility of mortgage interest payments.
Both parties could end up losing in the dispute over Nordea’s head office, according to several commentators. Nordea has threatened to move its headquarters out of Sweden as a result of the political decision to raise the fees for the resolution reserve (to aid banks in the case of a financial crisis – ed.).
However, although the government has so far focused on the positive elements of a Nordea move for taxpayers, an anonymous source to SvD points out, “It would make big international news. It could lead to a discussion about the business climate in Sweden, something the government does not want.” On the other hand Nordea risks disappointing customers, as the move could be perceived as a rejection of the bank’s largest market.
Meanwhile, writing in Dagens Industri today, MEP Gunnar Hökmark accuses the government of undermining Sweden’s competitiveness with the new bank tax and says that it is incomprehensible that Finance Minister Magdalena Andersson want to bring in this tax, which is making Nordea, the Nordic countries’ largest bank consider moving.
After several years of dramatic price rises, Sweden is now one of the countries at risk of a collapse in house prices, resulting in GDP growth slowing down.
House prices have risen, in real terms, by over 30% in Sweden and New Zealand in the past three years, accompanied by rising household debt. Now, according to credit rating institute, Moody’s, the two countries are most exposed to falling house prices.
Jens Magnusson, from SEB, says the warnings are correct but that the conclusions can be qualified. He points out that price increases in Sweden do not mainly come from speculation and that lending is distributed so that those with the highest incomes borrow the most.
Moody’s report also points out that Sweden’s social safety net provides a cushion for households but means greater economic exposure if things begin to get shaky.
There are no winners in the UK’s exit from the EU, according to Finance Minister Magdalena Andersson who wants British guarantees before negotiations can begin on a trade deal.
She also warns for emotional turmoil during the negotiations. “There will need to be adults in the room,” she says pointing out that both jobs and growth are at risk. The UK wants to negotiate a free trade deal alongside the exit negotiations but Magdalena Andersson is sceptical about how realistic this is.
“It is important that the UK meets its financial obligations towards the rest of the EU,” says Andersson, as the UK has obligations of between 50 and 60 billion euro to the EU (between 475 and 570 billion kronor).
The National Board of Trade in Sweden (Kommerskollegium) has calculated that Swedish companies are going to have to pay 2.1 billion kronor in duties when the Brits leave the EU if no new trade deal is in place.
Trade Minister for Ukraine Nataliya Mykolska is in Stockholm to attract Swedish companies to Ukraine. The selling points are low wages, speedy reforms and an EU agreement.
She says areas of priority are food, light industry, timber, furniture and IT. She also sees potential in tourism. She says the government has also worked hard to counter corruption, saying that more has been done in the past three years than in the preceding 25 years.