How They All Came to Love the VAT: Consumption Taxes, Big Business, and the Welfare State in Sweden

Gunnar Lantz ()
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Gunnar Lantz: Umeå University

A chapter in Worlds of Taxation, 2018, pp 49-72 from Palgrave Macmillan

Abstract: Abstract Several studies emphasize the importance of value-added tax (VAT) for financing extensive Scandinavian-type welfare states. This questions common perceptions of labor parties’ preference for taxing the rich. This chapter examines how Sweden came to adopt VAT, and its precursor the sales tax, in the 1950s and 1960s. The conclusion is that labor governments intentionally used this fiscal measure to achieve a comprehensive welfare state. Resistance was answered with promises of compensation for low-income households. The influence of international organizations for choosing VAT is not supported. Concerns voiced by the domestic business community about keeping up with international competition are given more weight as an explanation. Repeated appeals for reliefs from taxation of business inputs were another decisive factor in the transition from sales tax to VAT.

Keywords: Sweden; Value-added tax (VAT); Welfare; Regressive taxation; Business interests; Labor movement (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psitcp:978-3-319-90263-0_3

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DOI: 10.1007/978-3-319-90263-0_3

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