Debate mounts in Sweden over tax on banks

Considered following the financial crisis of 2008, a new tax on banks to come into force in early 2022 is causing debate in Sweden. A bill, proposed last September, provides for the introduction of a “risk tax” on the country’s banks in order to strengthen public finances in the event of a new financial crisis. This would be imposed on financial institutions according to the amount of debt they hold.

According to the coalition government of the Social Democrats and the Greens, whose project is supported by the Center and the Liberals, banking establishments should be taxed more particularly because they represent a risk for economic stability.

Target operations abroad

This risk can “cost large sums of money to taxpayers”, insisted the Prime Minister, Stefan Lofven, in a message posted Monday on Facebook. It is therefore “reasonable” to ask the banks to pay more. Thus, in 2022, “we will introduce a new tax on banks,” he said, specifying that it could bring in 5 billion crowns (493 million euros) in tax revenue from the first year.

Repeatedly revised, the latest version of the bill provides for a tax rate slightly lower than that originally planned. But he also wants to target banking operations outside Sweden. “This change aims to protect Swedish taxpayers from the problems faced by Swedish banks in their foreign branches,” a spokesperson for the Ministry of Finance told Reuters.

Lack of efficiency, warns supervisor

Even reformed, the banking sector is still standing against this project. On Monday, the association representing the country’s bankers said the new tax could hurt the competitiveness of Swedish banks and would likely contradict EU law, Bloomberg reports. Bankers suggest that it may also undermine the sector’s sustainability efforts.

For his part, the Swedish supervisor warned that a levy targeting bank debts would not correctly reflect the real risks of the sector. According to him, capital requirements would be more effective in ensuring financial stability.

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