The Strategist

Nordea Bank Warns: Sweden May Get the Capital Fleeing Away

05/12/2015 - 15:31

Nordea Bank’s Chairman of the Board is urging Sweden to abandon the planned tax on financial activities, due to which the country is, after all, could lose a source of income.

Stefan Flöper
Stefan Flöper
The proposal that the government, presented at the beginning of this month, can backfire because "over time it can encourage banks to change the way they operate," - said Bjorn Wahlroos to Bloomberg news agency. Banks have almost no limits in deciding which parts of their business "to establish here in Copenhagen, London or even in another place," - he said.

Finance Minister Magdalena Andersson believes that the Swedish banks are now "paying enough taxes," although "make a lot of money." The planned tax – the replacement for the last sentence, which could not meet the EU competition rules - will now be revised and, according to the Government, it will last until November 2016. "We pay the income tax just like the others, so we really cannot understand the logic," - said the chairman of Nordea.

But the Ministry of Finance argues that the Swedish banks currently have an advantage over other sectors in regards that VAT requirements are not applied to them. As the Government stated, a new tax on banks will be applied either in respect of income or salary fund. According to the Government, revenues due to the new tax could reach around 4 billion kronas (485 million dollars).

- I see an opportunity to increase taxation of the banking sector, - earlier said Andersson.
- The amount of taxes paid by the banking sector decreased by 4 billion kronas because of the previous tax cuts for businesses. And it's when they get very big profits and do not pay VAT, - she said.

According to analysts, the government is likely to choose the option for taxation of income received by banks in Sweden, as it will not interfere with them in order to reduce unemployment.

As previously reported, the Swedish authorities are planning to introduce a new tax on banks to increase tax collection and ensure social welfare. Most likely, they will introduce a new tax on financial activities, which will be collected from the income generated by banks. But it is also considered an alternative possibility of a tax on bankers' salaries.

It is expected that the new tax would allow the Government of Sweden to collect about 429 million euros. At the present time, the issue about the new tax is being discussed with market participants, and it is unclear when it will be introduced.

The Swedish authorities argue that the tax is planned to introduce in order to improve the social system in Sweden, and to reduce unemployment. The government set the goal to bring it to its lowest level in the EU by 2020. Now the figure is 7.9%.