Why Swedes love to pay taxes

By , K24 Digital
On Wed, 20 Jan, 2021 12:59 | 5 mins read
In case of unemployment, most individuals receive 80 per cent of their previous salary for the first 200 days of inactivity. [PHOTO | FILE]
In case of unemployment, most individuals receive 80 per cent of their previous salary for the first 200 days of inactivity. [PHOTO | FILE]
In case of unemployment, most individuals receive 80 per cent of their previous salary for the first 200 days of inactivity. [PHOTO | FILE]

Citizens of Sweden love to pay their taxes despite the compulsory deductions going as high as 60 per cent.

With an average tax cut of 48.2 per cent, records indicate that Sweden’s tax burden is the second-highest in the world after Denmark. United Kingdom’s tax burden average, on the other hand, is 36.6 per cent of the Gross Domestic Product (GDP), the basic rate of tax is 20 per cent and the higher rate 40 per cent, plus National Insurance at 11 per cent for those earning between £105 (Ksh15,800) and £770 (Ksh116,000) a week, and 1 per cent for anything earned above this limit.

Denmark, Sweden and Norway top almost every barometer of successful countries, The Guardian reports.

Swedes' personal income tax can be as little as 29 per cent of their pay, but most people --anyone earning over £32,000 (Ksh4.8 million) -- will pay between 49 and 60 per cent through a combination of local government and state income tax.

Despite Sweden’s mandatory levy being high, multiple interviews published on The Guardian, suggest that a majority of the citizens are happy paying their taxes, and do not see the deductions as a problem at all.

“I am very happy to pay high taxes because I know I am getting value for the money later on,” Valentina Valestany, a 39-year-old legal adviser, was quoted by the publication as saying.

Valestany said she was especially pleased with the school her teenage daughters Westa and Anastasia attend.

“Lunches are free, it was no problem getting in. My daughters receive a very good education and they have great teachers.”

Nicholas Aylott, a 38-year-old British lecturer, who works as a political scientist at Stockholm's Södertörn University College, highlighted the differences between his mother country, the UK, and Sweden.

“If you start talking to someone in Britain, you can be fairly sure that they will end up saying that taxes are too high. In Sweden, you can't do the same,” he said. “Most people trust the state to manage taxes well. There's a broad, deep faith that the money going into the welfare state will be employed usefully.”

Aylott pointed out that self-interest is at play: “The median voter is a woman who works for the public sector, and around two-thirds of the electorate draw most of their income from the state, either because they work in the public sector or draw benefits from it.

“Swedes are very attached to the idea of the state as the People's Home. Everyone in society is under the same roof, everyone will be protected. Sweden is now a more diverse society, but this idea still persists,” added Aylott.

Childcare is important to Aylott and his wife, Elena, as they have a young son, and in Sweden, they have found it affordable, available and generally of good quality.

“The kindergarten that our son Alex attends costs just 1,200 kronor (Ksh14,600) a month. I have relatives in London who pay 10 times that,” he said.

“It was no problem finding Alex a place as there are plenty of local kindergartens where we live. In Sweden, we are able to raise a young child and hold two demanding jobs at the same time. In Britain, it wouldn't be as easy.'

Aside from universal kindergarten coverage, Swedes enjoy free schools -- public and private -- free health and dental care for under-18s, or generous personal benefits such as a child allowance of £1,080 (Ksh163,000) a year per child.

480 days of parental leave

One of the most eye-catching benefits the Swedes enjoy, is parental leave. A new child’s parents are entitled to a joint leave period of 480 days. For 390 days, they receive 80 per cent of their income, capped at 440,000 kronor a year (Ksh5.4 million), while for the remaining 90 days they receive 180 kronor (Ksh2,200) a day. In theory the leave is split fifty-fifty, but it is up to the couple to decide how they want to organise it. One partner can give as many days as he or she wants to the other so long as each parent takes up to 60 days at the minimum. A single parent is entitled to the full 480-day period.

In the case of the UK, Kenya and other countries, fathers can only take up to two weeks of statutory paternity leave, unless their employers offer them a more generous period.

Swedish parents can also stretch the leave by taking it part-time.

“You can take off an hour or two a day for certain periods, if you want. So if you want to leave work earlier to pick up your child from kindergarten, you will be paid by the state for the missing hours,” said Niklas Löfgren, an analyst at Sweden's Social Insurance Agency.

In the UK, if you are employed and conceive, you are entitled to statutory maternity leave of one year, and may be entitled to receive statutory maternity pay for up to 39 weeks regardless of how long you've been with your employer -- but fathers can only take up to the two weeks statutory leave.

Pensions and care for the elderly

Sweden has a progressive state pension system: the more you earn, the higher your final pension will be. The retirement age is also flexible: you can start drawing on it from the age of 61, with no fixed upper limit, but the longer you wait to draw your pension, the higher it will be.

Arne Paulsson, a pensions expert at Sweden's Social Insurance Agency, said: “If you earn the average salary of 260,000 kronor (Ksh3.2 million) a year, you will receive about 55 per cent of your salary as pension.”

“About 90 per cent of Swedes have occupational pensions on top of that, which amounts to 15 per cent of their salary. So, in total, people get about 70 per cent of their income when they retire.”

There is also a guaranteed minimum pension for those who have not worked enough to qualify for the state pension. Depending on personal circumstances, it can be at most 6,381 kronor (Ksh77,500) a month for a married person and 7,153 kronor (Ksh86,800) a month for a single person. You can start drawing on it from the age of 65.

Unemployment

In case of unemployment, most individuals receive 80 per cent of their previous salary for the first 200 days of inactivity -- up to 680 kronor (Ksh8,000) a day -- dropping to 70 per cent for the next 100 days.

To qualify, individuals must have been in paid work for a year before becoming unemployed. They must also be members of one of the country's 33 unemployment insurance funds, which most working Swedes are. These are partly funded by taxpayers' money and partly by members' fees, which vary according to professions.

If unemployed Swedes were not prior members of an unemployment insurance fund, they receive the basic unemployment benefit of 320 kronor (Ksh3,800) a day for 300 days if they worked full-time, dropping to 160 kronor (Ksh2,000) if they worked part-time. During that time, unemployed Swedes must show that they are actively looking for work. If they refuse the first job offer, they lose 25 per cent of their benefits for 40 days. If they turn down three job offers, their benefits are suspended. If Swedes have not found a job after 300 days, they will be enrolled into a job training programme until they find one, receiving 65 per cent of their previous income during that time.

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