Tuesday, April 10, 2007

STOCKHOLM — Traditionally a European champion when it comes to high taxes, Sweden has been getting a dose of economic liberalization over the past six months from its new conservative government.

In just a matter of weeks, the new government of Prime Minister Fredrik Reinfeldt has announced it is abolishing the property tax, and very symbolically, the wealth tax.

The moves signal an easing of control by the state and a move away from the lavish welfare system that has been held up as a model of social democracy by a large part of Europe’s left-wing for decades.

“This is a step in a more liberal direction, but it’s not a very big step, it’s not a very radical change,” said Stefan Lundgren, the director of the Swedish Center of Political Studies.

Under the plans, the wealth tax, which was created in 1947, will be abolished this year while the formal abolition of the property tax will be presented later this year and be applied in January.

The measures were featured in the electoral platform of the four parties in the ruling center-right coalition that ousted the Social Democrats in legislative elections in September.

The outcome of the election was seen as a sign of a wish by the Swedish population to reform the way Sweden works.

“The goal of this government is in fact to have a smaller state,” said Mats Knutson, a political analyst at Svt television station.

In 2005, obligatory tax payments accounted for 52.1 percent Sweden’s gross domestic product, according to the European Union’s Eurostat data agency.

Since its arrival in power, the center-right coalition has initiated a series of reforms.

It started out in December by modifying the system of unemployment benefits, reducing benefits and increasing payments.

Last month, the government proposed ending state participation in six companies, including Vin & Spirit, the owner of the famous vodka Absolut.

“Sure, it is a step towards a more market-oriented policy,” said Klas Eklund, chief economist at SEB bank.

“Lower real estate tax is of course a way to increase incentives to own your own house. There are a number of small steps taken now: wealth tax, real estate tax, low unemployment benefits, lower income tax, easier to start your own company, less bureaucracy for small entrepreneurs.”

The left-wing opposition says the government has gone too far.

“We are starting to recognize a rightist policy. One week, they abolish the wealth tax and the next the property tax instead of relying on the welfare state,” Par Nuder, the Social Democrats’ economic spokesman, told the TT news agency. “It is an unfair policy, which increases gaps.”

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