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Swedish report Swedish report
by Euro Reporter
2012-06-11 09:25:03
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Sweden to close $880 ml private equity tax loophole

Sweden is to close a loophole used by private equity groups and others to avoid tax, the government said on Friday, provoking criticism from the main business lobby. The private equity sector in Sweden, home to EQT and Nordic Capital, is the second biggest in Europe relative to gross domestic product (GDP), at 250 billion crowns ($34.91 billion), about 7 percent of output.

However, the centre-right government has sought a crackdown on private equity firms after media and tax authority investigations showed them using tax rules to reduce their bills to the state at the same time as they make profits in the tax-funded health sector. "The proposal means an efficient limitation of aggressive tax schemes," Finance Minister Anders Borg said. "We are closing the possibility to use tax havens." Borg told a news conference that he expected the new rules to come into effect in January 2013 and boost annual tax revenues by 6.3 billion crowns ($880 million).

The Confederation of Swedish Enterprise, the largest business lobby, was critical of the plans and accused the government of populism. "The model the government is now proposing will unfortunately worsen the predictability companies need when deciding on investments in Sweden," lobby chief Urban Backstrom said in a statement. The new rules will stop a scheme whereby a company in Sweden borrows money at high rates of interest from a firm in the same group in a tax haven. The Swedish entity can reduce its tax bill by writing off the interest costs, while the overseas entity retains the interest payments and pays little or no tax. Borg estimated that Sweden loses 20-30 billion crowns in tax revenues through the loophole.

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Sweden’s Higher Rates Create Instability

Higher benchmark interest rates in Sweden create financial instability as banks are forced to go abroad for short-term funding, Riksbank Deputy Governor Lars E. O. Svensson said, adding an argument to his call for rate cuts.  “Swedish banks are now choosing to fund themselves by short-term borrowing in foreign currencies, which is cheaper than borrowing in Sweden,” he said in a speech published on the Stockholm-based bank’s website. “But this entails some risks as foreign investors are an unstable source of funding.”

Svensson has advocated deeper rate cuts than the majority of the bank’s board and reiterated that rates have been too high as inflation has undershot the bank’s 2 percent target over the past 15 years. The objective shouldn’t be “prejudiced” out of consideration for financial stability, he said.

“The fact that inflation has undershot the target appears to have led to a significant real economic cost in the form of higher average unemployment,” he said. The Riksbank in April voted 4 to 2 to keep its main rate unchanged at 1.5 percent and predicted no more cuts amid signs of a pickup in growth. The bank has cut rates twice since December after the economy contracted at the end of last year.

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Sweden Democrats in false funds claim

The youth league of the Sweden Democrats SDU) has accepted almost 885,452 kronor ($123,000) in funding from Helsingborg municipality without being entitled to the money, according to the nyheter24.se website. Helsingborg municipality told the website that if SDU had claimed the funding on faulty premises then it will seek advice from its lawyers. "We have failed in our controls," Ulf Bengtsson at Helsingborg municipality told nyheter24.se.

The problem lies in that SDU Helsingborg is only entitled to apply for funding if its national organisation is also in receipt of state funding. SDU's national organisation has not been awarded state funding as its applications have been deemed to be incomplete. Sweden Democrats' press officer Martin Kinnunen told news agency TT that the party was not aware of the requirement that funding for its national organization was a prerequisite to receiving local support.

The Sweden Democrats now plan to meet with representatives from the municipality in order to clarify the situation.  "Nobody wants a lawsuit," he said. "Well, we don't anyway." Kinnunen was not however surprised that SDU Helsingborg was in receipt of municipal funds explaining that the youth league was short of money and that Helsingborg had stepped in with sponsorship.

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Sweden’s role in Nazi defeat of Norway is laid bare

Relations between Norway and Sweden are being strained with the publication of a book that details how Stockholm aided the Nazis during the Second World War as their neighbours fought and lost a battle against the German invaders. Sweden stayed neutral in the war, but Norway was among Adolf Hitler’s first conquests. Now a new book shows how Sweden let the Germans use its efficient rail network to transport men and materials to the battle of Narvik, where British troops were deployed in a bid to stave off the Nazis. Narvik-based journalist Espen Eidum spent three years sifting through Norwegian, Swedish and German archives to discover how the Nazis had managed to get troops and supplies to the front lines in Narvik in 1940, enabling them to turn a losing battle into a decisive victory, which led to the occupation of the whole country. Sweden, although neutral, had in fact gone out of its way to aid the Germans, who relied on the country for much of its iron ore during the war.

“The Germans used the Swedish rail network on a large scale during the fighting,” Eidum said after the publication of his book, Blodsporet, or The Blood Track. “The operation was much more extensive than historians have previously realised.” The book details how in October 1940, four months after Narvik had become a crushing defeat for both the Norwegians and Winston Churchill, who had sent British forces there, Swedish diplomats in London lied to representatives of the Norwegian government in exile, telling them Sweden had not allowed the Nazis to use its rail network to get to the front. “This was not the case,” said Eidum. “The German foreign ministry had earlier summoned the Swedish ambassador in Berlin to inform him that Adolf Hitler had personally requested for the Nazis to be permitted to send three trains with 30 to 40 sealed carriages through Sweden to the far north of Norway. “Hitler’s representatives told the Swedes that the Germans had a number of wounded soldiers at the front and urgently needed to send in medical officers and food. The Germans also made no secret of the fact that winning the battle in Narvik was a matter of some pride for Hitler.”

Once permission was given, Germany sent in combat troops disguised as medical personnel. “For every actual medical officer or orderly, the trains carried 17 infantrymen,” said the author. “A report sent by a Swedish representative in Berlin, who watched the officers board the train, left little doubt that the Swedes knew the trains were being used for troop movements.” In addition, according to the book, the trains carried heavy artillery, anti-aircraft guns, ammunition, and communications and supply equipment. And once the swastika flew over Narvik, Sweden allowed German trains to run to the ice-free port, taking Swedish iron ore back to Germany. The rail network was also used to send Norwegians to Germany, many of them bound for concentration camps., said Eidum. “And hundreds of thousands of Germans passed through Sweden on their way to the eastern front. This made a great deal of money for Swedish rail operator SJ over a three year period.” In a 1940 letter to Anders Frihagen, his envoy in Stockholm, Norway’s prime minister, Johan Nygaardsvold, asks him to convey his anger to Swedish prime minister Per Albin Hansson. “If YOU can arrange a private conversation with Per Albin Hansson, tell him there are two things I want to experience, and those are: that the Germans get hunted out of Norway and, secondly, that I get to live long enough to give him and his entire government a proper dressing down. “There is nothing, nothing, nothing I hate with such passion and wild abandon as Sweden – and it is his fault.”



      
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