“It is hard to see the proposal as anything other than a purely punitive tax on the financial sector in Sweden.”
That is the reaction of Göran Espelund, chairman of the Board at Lannebo Fonder, one of Sweden’s best known boutiques, to proposals put forward to boost tax revenues by introducing a 15% additional income tax on those working in the financial sector.
Amid dire warnings from both the Swedish Investment Fund Association and the Swedish Bankers’ Association – which warned that thousands of jobs could go in banking – the sector is reeling from the implications of a 545 page report produced following a government-ordered inquiry into exemptions from value added tax enjoyed by the industry. InvestmentEurope has already reported the broader Fund Association response to the financial tax proposal (see: http://www.investmenteurope.net/regions/swedendenmarkfinlandnorway/new-swedish-tax-could-decimate-local-fund-industry/ ) Now, Espelund has added his voice to those warning of the risks attached should the proposed tax be made official government policy.
“This is additionally negative for Lannebo Fonder, which since it started has chosen a fully Swedish struture, with all ownership companies, funds and operations in Sweden and which likes to do business in Sweden,” Espelund said.
“To claim that it is about anything other than a purely punitive tax is just nonsense. The arguments as to why this is a poorly thought through proposal are many.”
“I do not even understand the main argument that the financial sector should be taxed because the activity in itself is not required to pay value added tax. VAT on other activites is paid by the end consumer, not the producing company. It is likely that the increased costs the tax brings with it will as far as possible be put onto customers, who will be those who ultimately pay, not the financial companies’ equity owners, which is possibly the objective of the proposal.”
“At the same time we are trying to make Sweden an attractive place in which to establish funds in Europe, through the proposals recently put forward by the [fund industry inquiry – see: http://www.regeringen.se/contentassets/c1e668bf3373497d88e7b0ef014d9f2a/en-hallbar-transparent-och-konkurrenskraftig-fondmarknad-sou-201645] this proposal acts in precisely the opposite direction. The risk of an exodus of parts of or entire operations increase markedly the greater the differences in cost levels become. Often, leaving is an empty threat, but in this case a reality. SwedbankRobur has already moved its back-office to Latvia, East Capital its operations to Luxembourg, and shown that it is possible without any great problems.”
“The Swedish fund market is dominated by four players. The increasing burden of regulation since Lehman has already led to costs for running operations rising markedly and become a real barrier to new players starting up. When costs for running operations go up again through this proposal, not least given personnel costs constitute the largest single cost for most fund companies, it will lead to even more reduced competition in a market that is already characterised by lack of competition, something that among others the Swedish Competition Authority has pointed out on numerous occassions.”