Read news from:
Austria
SHARE
COPY LINK

POLITICS

Full steam ahead for Swedish economy in new three-part budget bill

Sweden has won the fight against inflation and expects GDP to grow next year, Finance Minister Elisabeth Svantesson proudly proclaimed as she presented the government's budget bill for 2025.

Published: 19 September 2024 08:33 CEST
Full steam ahead for Swedish economy in new three-part budget bill
Sweden's budget bill for 2025. Photo: Pontus Lundahl/TT

“Going forward, the task will be to ensure that high inflation does not return, and at the same time to implement reforms and investments that build a more prosperous, safer and more secure Sweden for generations to come,” said Svantesson in a statement on Thursday morning.

The government predicts that Swedish GDP will grow 2.5 percent next year followed by 3.2 percent 2026.

Unemployment, however, is expected to remain unchanged at 8.3 percent in 2025, only beginning to drop in 2026 (7.9 percent, according to the government’s predictions, followed by 7.6 percent in 2027).

Svantesson told a press conference that a strong focus on economic growth would create jobs.

The 2025 budget, worked out in collaboration between the right-wing government coalition and far-right Sweden Democrats, is far more expansionary than the restrained budget Svantesson presented last year when Sweden was still fighting high inflation: 60 billion kronor towards new reforms rather than 39 billion kronor for 2024. Almost half, 27 billion kronor, will go towards funding lower taxes.

ANALYSIS:

Svantesson highlighted three areas in which new reforms are prioritised:

  • Strengthening household purchasing power after several years of the high cost of living putting a strain on household budgets, with reforms set to push the tax burden to its lowest level since 1980, according to the government.
  • Reinstating the “work first” principle, meaning that people should work rather than live on benefits. Some of the measures include language training for parents born abroad and increasing the number of places in vocational adult education.
  • Increasing growth, focusing on investments in research, infrastructure and electricity supply.

In the debate in parliament on Thursday, the centre-left opposition is expected to criticise the government for lowering taxes for high earners and not investing enough in welfare. 

Investments in healthcare, social care and education are significantly reduced in this budget compared to last year: down from 16 billion kronor to 7.5 billion kronor. 

Meanwhile, the hike of the employment tax credit (jobbskatteavdraget) – a tax reduction given to people who pay tax on their job income – is expected to lead to a 3,671 kronor tax cut for people on the median salary of 462,000 kronor per year.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

ECONOMY

Winners and losers: What are the tax cuts for Sweden in 2025?

A total of 27 billion kronor of Sweden's 60 billion kronor budget reforms will go towards lowering taxes. Let's take a look at the main tax cuts and who is set to benefit the most.

Published: 19 September 2024 11:55 CEST
Winners and losers: What are the tax cuts for Sweden in 2025?

Who are the winners and losers?

Two high earners who have a joint income of around 180,000 kronor a month will get just over 3,400 kronor more in their bank account every month, whereas a couple of pensioners will only get 226 kronor more a month, according to banking giant SEB.

What are the tax cuts?

A new employment tax credit, a rebate given to everyone who has a job, worth 11 billion kronor. This will benefit everyone earning more than 16,000 kronor a month.

A rule that previously increasingly reduced the employment tax credit the more you earned will be scrapped. People earning between 778,000 kronor and just over 2 million annually will benefit the most. It’s expected to cost the state 4.7 billion kronor.

Taxes for pensioners are being lowered to the tune of 2.5 billion kronor, which means a median pensioner will see their taxes lowered by approximately 1,400 kronor a year.

The cap on who has to pay state tax will be raised to monthly salaries of 53,590 kronor. This cap is usually automatically raised every year in line with inflation, but last year the government suspended the hike due to Sweden’s rampaging inflation at the time.

READ ALSO:

Are you one of 3.5 million people in Sweden saving money in an ISK account? In the new budget, the fixed tax on ISK accounts will be scrapped for any accounts with a balance of less than 150,000 kronor, rising to 300,000 kronor in 2026.

Cutting Sweden’s aviation tax will cost the state 870 million kronor. It corresponds to around 80 kronor for a domestic flight.

A total of 3.2 billion kronor will be spent on lowering the tax on fuel for vehicles.

If you own a motorhome, you’ll get a tax cut of almost 7,000 kronor, as 90 million kronor of the budget is allocated to lowering taxes on recreational vehicles.

What are the reactions?

The centre-left opposition immediately accused the government of unfairly prioritising high earners, also criticising the fact there’s significantly less money earmarked for welfare in this budget compared to last year: down from 16 billion to 7.5 billion kronor.

“It not only makes a mockery of ordinary people, but is also bad for the Swedish economy,” said Mikael Damberg, finance spokesman for the Social Democrats.

  • Don’t miss the latest news and analysis about the Swedish economy by downloading The Local’s app (available on Apple and Android) and then selecting Economy in your Notification options via the User button

Pensioners’ association PRO also argued their members should have been compensated more in the budget. “We’re really talking ‘thumbs down’,” PRO chairwoman Åsa Lindestam was quoted by the TT news agency as saying.

Swedish Commerce, the association serving the trade and commerce sector, on the other hand welcomed the budget, as its members are directly affected by strengthening customers’ purchasing power – a key priority for the government in the bill.

The Confederation of Swedish Enterprise also praised the budget for trying to speed up growth, get more people into work and strengthen Sweden’s competitiveness.

SHOW COMMENTS