Mining and taxation in Sweden

The Swedish taxation regime for mining has been criticised for being overly advantageous for mining companies, and for not adequately safeguarding the interests of the state and/or other rights- and stakeholders. The critique has been expressed in the media and in political discourse, whereas more thorough assessments are lacking. This paper addresses this shortcoming, and it uses financial modelling and international comparisons. The Swedish taxation regime for mining is not substantially different from that of other sectors of the economy, and it has also been unchanged for a long time. It includes no royalty nor any fiscal instrument to capture windfall profits, and it is based on statues rather than bespoke contracts. In terms of incomes to the state from mining performed by private companies, the most substantial ones are the corporate income tax (CIT) and the dividend withholding tax. In terms of ensuring local benefits, there is no specific instrument in place for mining. The overall taxation system is such that municipalities charge substantial pay roll taxes, and the taxes derived in this way are of the same order of magnitude as taxes normally derived by the central state through the CIT. This principle of ensuring local benefits may however be under threat, as mining becomes increasingly mechanised—with fewer employees—and with an increasing prevalence of so-called fly in-fly out personnel. The findings confirm that the Swedish tax regime is comparatively generous towards mining companies. Furthermore, the lack of a royalty means that the state foregoes opportunities to earn incomes in times of poor mining profitability, and the lack of a windfall tax similarly gives an uneven distribution of benefits when commodity prices are high. This, in turn, suggests that there is a need for reform. Moreover, the current system includes a so-called mineral fee, which mainly functions to compensate landowners, but a smaller part also falls to the central state. The funds collected by the state in this way are insignificant, and as this component of the mineral fee is both poorly understood and contentious, it is recommended that it be discontinued. It is recommended that in general, economic tools that specifically model the outcomes of taxation regimes for mining be supplemented with general analyses of the whole taxation regime in question, to provide a better basis for analysis, and associated policy advice.