4 ms·

This has probably more to do with Sweden having so high taxes on labour that repairs becomes impossible without a tax break. An average Swede gets ~ a third of

by berntb 10y ago

This has probably more to do with Sweden having so high taxes on labour that repairs becomes impossible without a tax break. An average Swede gets ~ a third of the money the company pays for his wages. (30% tax, 30% in social charges etc.) If he is going to rent an hour from someone with the same salary as himself/herself, that will be three times the hourly salary. (I'll ignore the other costs here.) So, in sum, because of the taxes etc, a Swede have to work [at least] a full day to buy an hour of work time. (Reservation for the exact numbers. It was a while since I lived in Sweden. People might keep 40% or so now, but I also ignored a lot of extra costs.)

vidarh 10y ago
According to the OECD Taxing Wages report [1] for 2016, the total tax wedge for Sweden, including employer contributions, is 42.7%. (Note: for those who are confused about it: This is not the percentage tax paid out of contracted wages - the average tax paid on the contracted wages are much lower) > If he is going to rent an hour from someone with the same salary as himself/herself, that will be three times the hourly salary. (I'll ignore the other costs here.) That may be true, but not due mainly to taxes, but because you are also paying for "dead time", marketings costs and others. [1] http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/taxing-wages-2016_tax_wages-2016-en#page20 http://www.keepeek.com/Digital-Asset-Management/oecd/taxatio...
- berntb 10y ago
  Please see this: https://en.wikipedia.org/wiki/Non-wage_labour_costs https://en.wikipedia.org/wiki/Non-wage_labour_costs https://sv.wikipedia.org/wiki/Arbetsgivaravgifter_i_Sverige https://sv.wikipedia.org/wiki/Arbetsgivaravgifter_i_Sverige I wrote "a third of the money the company pays for his wages", so I assume that is ignored in the "taxes" report you reference. Just these "social charges" (as I called them) is 31.42% already (just ten percent lower than the OECD report).
  - vidarh 10y ago
    Those are included in the OECD total tax wedge numbers. EDIT: The reason your numbers don't add up is that you can't just add those numbers together with income tax numbers - you also then need to add the amount paid by the employer to the salary to get the gross amount paid for a worker, and recalculate the percentage from the total base.
    - berntb 10y ago
      I know the definition. I also know that just the "hidden" cost not presented to people as "tax" is 31.42% of the salary. The tax rate in itself is generally around 30%. So something is rotten in Den.. Swedish data. :-) Anyway, it doesn't change my original argument really. I ignored lots of other costs per employee to sell repair time. Edit: It is probably that the lowest amount to pay taxes on have been raised a lot since I lived in Sweden. Your data might be correct, at least for people with a low income. (The numbers are too big with 31.42% added to the sum and 30% tax for that to result in 41%.) Edit 2: Regarding total tax and calculation. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_salary_taxation_through_PAYE https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_...
      - vidarh 10y ago
        > (The numbers are too big with 31.42% added to the sum and 30% tax for that to result in 41%.) Salary is the original "100%" here, but the cost to the business is higher than that, and so if we are to talk about the cost to the business we need to adjust the percentages accordingly. 100% + 31.42% is the total expense to the business. So 30% of salary and 31.42% of salary = 61.42% of salary, but only 46.74% of the total expense. But most people will have well below 30% income tax. E.g. here's the Swedish tax authority's own examples of income tax rates paid: http://www.skatteverket.se/privat/skatter/arbeteochinkomst/sabeskattasdinlon.4.54a3d27615036ac09f316ce.html http://www.skatteverket.se/privat/skatter/arbeteochinkomst/s... Average salary in Sweden is around the ~375,000 SEK, putting typical income tax for someone on an average salary towards the lower end of the 23% range 28% somewhere from that table. Using 23% in the calculation above, we'd end up with a tax wedge of 41.4%. With 28% we end up at 45.2%. This is before any additional deductions. It's close enough to the OECD numbers that if you were to look at the basis data and assumptions underlying the OECD report (it's all public), and/or go through the actual tax calculations that the above table is based on, and make sure the years match up, I'm pretty sure you'd get it to match. So let's say it's in a range somewhere around 41% and 45%. > Edit 2: Regarding total tax and calculation. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_.. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_.... That page uses headline rates without actually considering that the tax rates are not applied to the gross salary, but to taxable income, adjusted for various deductions. It totally confuses matters and is clearly written by someone who doesn't understand how tax works. It bears little relation to reality.
- charlesdm 10y ago
  Don't forget to add their 25% VAT rate if you actually want to spend your money.. so you end up with 42.7% + 25%. That's nuts.
  - titzer 10y ago
    Wouldn't that be 42.7% + (57.3% * .25) = 57%?
    - berntb 10y ago
      The difference is that the previous government lowered the taxes for the first 20K SEK earned per month. (This was mostly after my time in Sweden.) My point regarding the impossibility of service work at these levels stands. Quite a few tax exemptions had to be created to get the population to start paying taxes for those kinds of jobs. Edit: For the part of the salary above ca 19K/month, you're correct. In fact, the taxes are progressive, so it is even worse.
  - vidarh 10y ago
    No, titzer gets closer, by pointing out that you for starters can't possibly pay VAT on buying stuff with money you don't have. You don't have the money you have paid in taxes. However, as I've pointed out elsewhere, that is total tax wedge including employer contributions. If you are looking at total cost to a business, your cost is 131.42% of your contracted salary. That is what the 42.7% comes from. Actual income tax on an average salary is somewhere below 28% (see discussion elsewhere where I cite a table from the Swedish tax authorities - 28% is their estimate for a 500k salary; average salary is roughly 375k). This would leave you with at most 72% of your salary to buy VAT rated stuff with. If you were to spend all of that on 25% VAT rated stuff, it'd mean an additional 18% tax on your salary, but only 13.7% of the total. That 13.7% is the number comparable to the 42.7% number, so if that was the case your total tax wedge would be 56.4%. However, that isn't the case, because you're not paying VAT on mortgage payments, for example, nor on any money you haven't actually spent (so savings etc.). Many goods and services are also taxed at lower rates. I don't know specifically about Sweden, but most countries don't apply VAT to basic food stuffs, for example (I do know Sweden has reduced VAT rates of 12% and 6% as well as zero rating - I just don't have a handy table of what the reduce rates applies to). If we more realistically assume that only half of your net income gets spend on VAT'able products and services, including it in the total tax wedge would only increase it by 6.85%. Your mileage will vary depending on how you spend, but it certainly won't under any circumstance increase your total tax wedge by anything remotely close to 25%.

by berntb 10y ago

vidarh 10y ago

According to the OECD Taxing Wages report [1] for 2016, the total tax wedge for Sweden, including employer contributions, is 42.7%. (Note: for those who are confused about it: This is not the percentage tax paid out of contracted wages - the average tax paid on the contracted wages are much lower) > If he is going to rent an hour from someone with the same salary as himself/herself, that will be three times the hourly salary. (I'll ignore the other costs here.) That may be true, but not due mainly to taxes, but because you are also paying for "dead time", marketings costs and others. [1] http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/taxing-wages-2016_tax_wages-2016-en#page20 http://www.keepeek.com/Digital-Asset-Management/oecd/taxatio...

berntb 10y ago
Please see this: https://en.wikipedia.org/wiki/Non-wage_labour_costs https://en.wikipedia.org/wiki/Non-wage_labour_costs https://sv.wikipedia.org/wiki/Arbetsgivaravgifter_i_Sverige https://sv.wikipedia.org/wiki/Arbetsgivaravgifter_i_Sverige I wrote "a third of the money the company pays for his wages", so I assume that is ignored in the "taxes" report you reference. Just these "social charges" (as I called them) is 31.42% already (just ten percent lower than the OECD report).
- vidarh 10y ago
  Those are included in the OECD total tax wedge numbers. EDIT: The reason your numbers don't add up is that you can't just add those numbers together with income tax numbers - you also then need to add the amount paid by the employer to the salary to get the gross amount paid for a worker, and recalculate the percentage from the total base.
  - berntb 10y ago
    I know the definition. I also know that just the "hidden" cost not presented to people as "tax" is 31.42% of the salary. The tax rate in itself is generally around 30%. So something is rotten in Den.. Swedish data. :-) Anyway, it doesn't change my original argument really. I ignored lots of other costs per employee to sell repair time. Edit: It is probably that the lowest amount to pay taxes on have been raised a lot since I lived in Sweden. Your data might be correct, at least for people with a low income. (The numbers are too big with 31.42% added to the sum and 30% tax for that to result in 41%.) Edit 2: Regarding total tax and calculation. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_salary_taxation_through_PAYE https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_...
    - vidarh 10y ago
      > (The numbers are too big with 31.42% added to the sum and 30% tax for that to result in 41%.) Salary is the original "100%" here, but the cost to the business is higher than that, and so if we are to talk about the cost to the business we need to adjust the percentages accordingly. 100% + 31.42% is the total expense to the business. So 30% of salary and 31.42% of salary = 61.42% of salary, but only 46.74% of the total expense. But most people will have well below 30% income tax. E.g. here's the Swedish tax authority's own examples of income tax rates paid: http://www.skatteverket.se/privat/skatter/arbeteochinkomst/sabeskattasdinlon.4.54a3d27615036ac09f316ce.html http://www.skatteverket.se/privat/skatter/arbeteochinkomst/s... Average salary in Sweden is around the ~375,000 SEK, putting typical income tax for someone on an average salary towards the lower end of the 23% range 28% somewhere from that table. Using 23% in the calculation above, we'd end up with a tax wedge of 41.4%. With 28% we end up at 45.2%. This is before any additional deductions. It's close enough to the OECD numbers that if you were to look at the basis data and assumptions underlying the OECD report (it's all public), and/or go through the actual tax calculations that the above table is based on, and make sure the years match up, I'm pretty sure you'd get it to match. So let's say it's in a range somewhere around 41% and 45%. > Edit 2: Regarding total tax and calculation. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_.. https://en.wikipedia.org/wiki/Taxation_in_Sweden#Example_of_.... That page uses headline rates without actually considering that the tax rates are not applied to the gross salary, but to taxable income, adjusted for various deductions. It totally confuses matters and is clearly written by someone who doesn't understand how tax works. It bears little relation to reality.
charlesdm 10y ago
Don't forget to add their 25% VAT rate if you actually want to spend your money.. so you end up with 42.7% + 25%. That's nuts.
- titzer 10y ago
  Wouldn't that be 42.7% + (57.3% * .25) = 57%?
  - berntb 10y ago
    The difference is that the previous government lowered the taxes for the first 20K SEK earned per month. (This was mostly after my time in Sweden.) My point regarding the impossibility of service work at these levels stands. Quite a few tax exemptions had to be created to get the population to start paying taxes for those kinds of jobs. Edit: For the part of the salary above ca 19K/month, you're correct. In fact, the taxes are progressive, so it is even worse.
- vidarh 10y ago
  No, titzer gets closer, by pointing out that you for starters can't possibly pay VAT on buying stuff with money you don't have. You don't have the money you have paid in taxes. However, as I've pointed out elsewhere, that is total tax wedge including employer contributions. If you are looking at total cost to a business, your cost is 131.42% of your contracted salary. That is what the 42.7% comes from. Actual income tax on an average salary is somewhere below 28% (see discussion elsewhere where I cite a table from the Swedish tax authorities - 28% is their estimate for a 500k salary; average salary is roughly 375k). This would leave you with at most 72% of your salary to buy VAT rated stuff with. If you were to spend all of that on 25% VAT rated stuff, it'd mean an additional 18% tax on your salary, but only 13.7% of the total. That 13.7% is the number comparable to the 42.7% number, so if that was the case your total tax wedge would be 56.4%. However, that isn't the case, because you're not paying VAT on mortgage payments, for example, nor on any money you haven't actually spent (so savings etc.). Many goods and services are also taxed at lower rates. I don't know specifically about Sweden, but most countries don't apply VAT to basic food stuffs, for example (I do know Sweden has reduced VAT rates of 12% and 6% as well as zero rating - I just don't have a handy table of what the reduce rates applies to). If we more realistically assume that only half of your net income gets spend on VAT'able products and services, including it in the total tax wedge would only increase it by 6.85%. Your mileage will vary depending on how you spend, but it certainly won't under any circumstance increase your total tax wedge by anything remotely close to 25%.