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The “dual” taxation in force in Sweden

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Sweden has long been characterized by a high level of compulsory contributions, but the tax burden has been significantly reduced over the last two decades. Swedish taxation weighs primarily on households. The majority of public administration revenue comes from indirect taxation and personal income tax. The latter largely finances local authorities and its marginal rate exceeds 50% for the upper brackets. Taxation of wealth is low.

Above all, Sweden was the first country to introduce a so-called “dual” system of progressive taxation of labor income and proportional taxation of capital income, during the major reform of 1991. In order to strengthen competitiveness, a The objective of reducing rates and broadening the base has also been consistently pursued. The corporate tax rate was gradually reduced to 20.6%, a level equivalent to the European average.

The moderate level of social security contributions is partly explained by the fact that the pension system relies heavily on capitalization. Overall, however, the taxation of labor remains relatively high, given the existence of a general tax on wages.

The 1991 reform was followed by a boom in foreign direct investment and an increase in the rate of growth of total factor productivity. Over the long term, Sweden has one of the highest business investment rates in the European Union, but the taxation applied to the labor factor goes hand in hand with structurally high unemployment.


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