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Swedish competition watchdog opposes proposed financial tax

[STOCKHOLM] Sweden's competition watchdog has come out against a proposed tax on financial services companies, saying it would hit their ability to compete internationally and skew the domestic market.

The opinion, published on the watchdog's website, was sent to the finance ministry, which is consulting on the proposal that could be introduced in the autumn budget.

Sweden's centre-left minority government has long sought to impose a financial services tax, saying the sector - which is exempt from value-added tax - should pay more to the state.

Critics, however, say a tax would be a heavy blow on a major contributor to the Swedish economy and could speed up a drive among some financial firms to move jobs abroad to take advantage of cheaper labour.

A government-appointed commission proposed in November an additional 15 per cent payroll tax for the financial services sector, a move it said would raise as much as US$795 million a year for state coffers.

The proposal, which has yet to be turned into a government bill, is going through a three month consultation process before the government decides whether to press ahead. "The Swedish Competition Authority considers that the proposal entails a competitive disadvantage for the Swedish financial services sector in relation to financial companies in other countries," it wrote to the finance ministry.

The authority said the proposal would also lead to more red tape, which could particularly hinder smaller financial firms.

The Swedish Council on Legislation, a state authority that performs judicial previews of draft bills the government intends to submit to parliament, has also rejected the proposal. It said a satisfactory impact assessment had not be carried out.

The plan has faced criticism from centre-right opposition parties, but the government can attach it to the budget bill which means it would likely pass in parliament.

It has also drawn criticism from the financial sector, which has said it would lead a banking sector that includes Nordea , Handelsbanken, Swedbank and SEB to move more jobs abroad.

The Swedish Bankers' Association said a study it had commissioned by consultancy Copenhagen Economics showed Sweden's financial sector could lose up to 16,000 of its 85,000 jobs if the commission proposal went through.

Sweden has the third biggest financial sector in the European Union relative to the size of the economy, behind only Switzerland and the Netherlands, according to the International Monetary Fund. It makes up 4.7 per cent of Swedish gross domestic product.

Financial markets minister Per Bolund told Reuters last week the government would listen to the opinions of the consulted bodies before finalising its proposal, but the aim was to introduce a financial tax in the autumn budget.


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