fredag 18 april 2008

Swedes like their welfare system

National differences count. A new survey shows that people in Sweden are willing to accept higher taxes to finance it. According to a study commissioned by the Swedish Association of Local Authorities and Regions (SALAR), 90 percent of Swedes prefer high-quality social welfare over lower taxes. And nearly as many Swedes, around 80 percent, are willing to pay higher taxes for better healthcare, schools, and care for the elderly.

“It shows that there is great confidence in our sector’s work,” said Anette Åkesson of SALAR’s welfare financing committee, in a statement.

“At the same time, we’re facing a situation where fewer are paying for more services, and where expectations for welfare services continue to increase steadily. That means that we must raise taxes by an excessive amount if we don’t find alternative and complimentary financing options,” she added.

SALAR expects Sweden’s population to add 870,000 residents by 2030, of which only 75,000 will be active in the workforce. With higher demand and rising costs for social services, combined with fewer paying into the system, SALAR estimates that a 10 percent increase in Sweden’s already high tax burden is needed to finance the country’s welfare state in 2030. And English language article on the subject can be read here
Swedes willing to pay higher taxes

If the country's welfare system is to continue, alternative sources of revenue are required. Taxes in Sweden fall primarily on wages, goods and services, as elsewhere in the developed world. The fundamental problem with such taxes is that they are self-destructive: the taxes consume their own base and overall levels of more than about 50% of GNP are not sustainable with present forms of taxation. This is particularly true of a country like Sweden, where there are huge variations in the geographical advantages and disadvantages of different parts of the country. In the south, and around Stockholm and Göteborg, this is reflected in high land values and consequently high house prices and commercial rents, and long waiting lists. But much of the rest of the country is only just above the margin - in other words, economic activity is only just viable. If taxes are shifted from labour onto land, this increases the geographical area in which business can flourish, as businesses in marginal locations are relieved of tax.

Although Sweden does not have the pressures of concentration that are found in the UK, Germany and France, such a switch would still be beneficial, as it would reduce pressures on the three conurbations of Malmö, Göteborg and Stockholm. It would also release a significant number of people at present engaged in running the system, as a land value tax system is easy to operate and makes use of the cadastral information which, in Sweden, is already routinely collected.

The ability to work without having to pay tax would also get rid of the perverse incentive built-in to income tax, which discourages people from working. At the bottom end of the income range, this would reduce welfare dependency and improve integration of immigrant communities where people are inevitably able to earn only low wages, at least initially. Without the need for them to pay tax, they would be more likely to work and contribute to the economy. The same tax shift would also discourage entrepreneurs and other high earners from moving abroad to avoid their tax liabilities.

Read about land value taxation here

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