January 21, 2019 / 11:31 AM / a month ago

Factbox: Landmark policy deal keeps Swedish Social Democrats in power

STOCKHOLM (Reuters) - Prime Minister Stefan Lofven’s Social Democrats have agreed a draft policy deal with the Centre, Liberal and Green parties that resolved Sweden’s political impasse created by an inconclusive election last September.

Sweden's Prime Minister Stefan Lofven reads the statement of government in the parliamentary chamber, in Stockholm, Sweden January 21, 2019. TT News Agency/Jessica Gow via REUTERS

Under the deal, Lofven has pledged to cut taxes for wage-earners and companies to secure the support of the centre-right Centre and Liberal parties.

Parliament gave Lofven’s coalition with the Greens a second term in office on Jan. 18 after more than four months of wrangling.

Below are key reforms outlined in the draft agreement.

- A broad tax reform is to be implemented that would lower taxes on income and enterprise. The reform includes an agreement to cut marginal tax rates and raise the threshold at which people start to pay the higher rate of tax.

- While income taxes are lowered, environmental taxes will be increased by at least 15 billion Swedish crowns ($1.66 billion) to help offset the loss of revenue.

- Taxes for retirees to be lowered in 2020 and pensions raised for those on low and medium incomes.

- Corporate taxes, especially for small and medium-sized companies, are to be made more favourable. Social contribution fees paid by companies are to be lowered while tax breaks for household services are to be extended.

- Labour regulations are to be adapted in a way that would allow companies greater leeway regarding whom to lay off in case of redundancies.

- Taxes on stock options will be lowered to make Sweden more attractive for start-ups in an international perspective.

- Interest rate payments on deferred taxes on housing sales will be abolished.

- The government pledges not to move forward with any proposals regarding limiting profits for private sector providers of tax-funded welfare services.

- The Swedish Debt Office to be tasked with conducting a trial with “green” government bonds while the investment rules for the state AP pension funds will be evaluated through 2020 to ascertain whether fossil fuel investment should be reduced.

($1 = 9.0097 Swedish crowns)

Reporting by Niklas Pollard and Daniel Dickson; Editing by Simon Johnson and Gareth Jones

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