3 ms·

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%.

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%.