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Some Issues Related to the Equity-Efficiency Trade-Off in the Swedish Tax and Transfer System

Author

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  • Henning Strand

Abstract

The Swedish universal welfare model relies on a high tax level to finance a variety of transfers to the workingage population both in the form of income replacements and income supplements and as services for health-, child- and elderly care. The available evidence, reviewed in this Working Paper, indicates that the system has powerful redistributive properties. However, the efficiency costs of the system are substantial. Taxes and benefits combine to face income earners with high effective tax rates and the unemployed with little reward from moving into employment, resulting in a declining intensity in the utilisation of labour. A complex tax code arising out of a significant difference in tax rates for labour and capital income impedes the establishment and expansion of enterprises. An internationally-high taxation of capital income acts as an impediment to savings and the development of the domestic market for risk capital. To these domestic distortions has to be added the ... Le modèle suédois de protection sociale universelle repose sur une fiscalité élevée afin de financer à la fois une variété de transferts au profit de la population en âge de travailler sous la forme de revenus de remplacement et de compléments de revenus ainsi que des services au bénéfice de la santé, des personnes âgées et de l’enfance. Ce système a des propriétés de redistribution très importantes qui sont mises clairement en évidence dans ce Document de Travail. Cependant, les coûts d’efficience du système sont substantiels. Les prélèvements et les transferts se conjuguant pour assujettir les particuliers à des taux marginaux d’imposition élevés, et les chômeurs étant financièrement peu incités à prendre un emploi, il en résulte une intensité déclinante de l’utilisation de la main d’œuvre. Un code fiscal complexe ayant pour conséquence une différenciation importante entre l’imposition du revenu du travail et celle du revenu du capital fait obstacle à la création et à l’expansion ...

Suggested Citation

  • Henning Strand, 1999. "Some Issues Related to the Equity-Efficiency Trade-Off in the Swedish Tax and Transfer System," OECD Economics Department Working Papers 225, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:225-en
    DOI: 10.1787/067275517348
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    Cited by:

    1. Ganghof, Steffen, 2001. "Global markets, national tax systems, and domestic politics: Rebalancing efficiency and equity in open states' income taxation," MPIfG Discussion Paper 01/9, Max Planck Institute for the Study of Societies.

    More about this item

    Keywords

    impôt; redistribution; redistribution; Suède; Sweden; taxes; transfers; transferts;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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