Sweden’s minority, centre-left coalition said on Wednesday it would cut income taxes by around 10 billion crowns ($1.16 billion) in its 2022 budget as it looks to support recovery from the pandemic and lay the groundwork for future growth.
Sweden’s economy has bounced back rapidly from the effects of the pandemic with the government expecting growth of around 4.4% this year.
Nevertheless, the minority coalition plans to boost the economy by around 74 billion crowns in its 2022 budget through tax cuts and extra spending – assuming it can garner enough support to pass its finance bill in a fragmented parliament.
“One of the most important lessons of the financial crisis was that we shouldn’t take our foot off the gas too early,” Finance Minister Magdalena Andersson, who is favourite to become prime minister when incumbent Stefan Lofven steps down in November, told a news conference.
“The pandemic is not over yet.”
Andersson said income tax cuts would cost around 7 billion crowns with lower taxes on benefits and tax breaks for unemployment insurance payments taking the total to 10.4 billion.
The main beneficiaries will be low and middle-income households, the government said.
In addition to boosting consumption, the budget bill due later this month will look to boost the welfare system and support the shift to a fossil-free economy, while the government also has a further reason to be generous.
It can only pass a budget with support from the formerly Communist Left Party and the right-leaning Centre Party. Complicating matters, the Centre has said it will not support the government if it negotiates a budget with the Left, which in turn is demanding a say on policy.