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OECD Economic Surveys: Sweden 2008

image of OECD Economic Surveys: Sweden 2008

This 2008 edition of OECD's periodic survey of Sweden's economy addresses key economic challenges being faced in Sweden including the current economic crisis and fiscal policy, tax reform, education and easing impediments to youth employment, and the next phase of privatisation.

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Taxation and growth

What direction should Sweden take?

In recent years, Sweden has implemented ambitious tax cuts aimed at boosting growth: it used to have the highest tax-to-GDP ratio in the OECD but is now starting to edge down the list. Yet, further reform may be needed. From income not much above average full-time earnings, the total marginal tax wedge on labour (contributions, income and consumption taxes combined) still reaches 70%. This probably helps explain short average working hours and hinders entrepreneurship, human capital formation and retention or attraction of highly-skilled staff from abroad. Corporate income taxes might also be under growing pressure from increasing capital mobility. Based on the recent OECD Taxation and Economic Growth study, this chapter assesses the Swedish tax system and the need for further tax reforms, focusing on some of the features of the tax system that matter most for longer-run growth.

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