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Thursday, August 25, 2005

Swedish tax rates

For those interested, read below the fold.

Income tax is, broadly speaking, divided into two collections. First you have your municipal or county tax and then the state tax.

Initially you get to deduct a certain amount of private pension payments along with the national pension scheme, so this reduces your taxable income by a few percent depending on your contributions. Maybe 1-3% for most people.

There is a variable "basic allowance" which is tax free, e.g. 11200 Kr ($2300).

With these deducted the local tax is taken, at a rate that averages around 30% depending on your county/city (varies from between 28 and 32% generally).

After this the taxable income is reduced (in 2002) by 273800 Kr ($57000) and the result is taxed at 20%. So the effective rate is around 50% for this chunk of your income.

That constitutes the "tax on labour".

There is an additionally:

30% flat rate on capital income
1% on assessed property value
1.5% general wealth tax on income over 1.5 million Kr ($313,000).

However this all varies a lot since the basic allowance varies, as well as rates from year to year. Last year the highest marginal rate was about 56%, kicking in at about $80,000. Not as bad as 1980 though when it was apparently 85%(!)

I found this little table for 2002, with the (average) amount of income lost to tax for various income bands, the bands are discontinuous for some reason...

0 – 50 Kr, 18%
100 – 150 Kr, 27%
200 – 250 Kr, 31%
500 - ... Kr, 42%

in approximate NZ dollars:

0 – 10 $, 18%
20 – 30 $, 27%
40 – 50 $, 31%
100- .. $, 42%

It's a bit difficult to compare this to NZ taxes since the NZ scheme is a whole lot simpler and things like sales taxes in Sweden vary according to what you buy. The normal VAT is 25%, but drops for food and other things. Also Swedish salaries tend to be higher than NZ overall for most classes of work, so comparing tax brackets is a bit more tricky than just doing a currency conversion. For example, many full time workers don't have much trouble exceeding the state income tax limit mentioned above.
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Posted by Chefen | 8/25/2005 06:47:00 pm


Blogger Antarctic Lemur said...

What a mess. Why do voters allow politicians to get away with these sorts of overly complex tax rules?

8/26/2005 02:05:00 am  
Blogger Chefen said...

Well you see. It is all PAYE so you don't really notice it. Then everyone looks forward to the summer tax return when people get back the tax they were overcharged, so it's a bit like a bank account except with no interest. Then you put your left foot in and shake it all about. And basically I think that is about it, at least as far as I've come to understand it.

8/26/2005 06:49:00 am  
Blogger Antarctic Lemur said...

Does Sweden have a political party with people like Roger Douglas &co?

8/26/2005 06:56:00 am  
Blogger Chefen said...

The closest, the Moderates, is the equivalent of National. There is no one economically more liberal than that... no one can afford to be until attitudes have shifted a bit more.

There is, however, no shortage of parties at the other extreme.

8/26/2005 07:02:00 am  

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