Swedish Tax Authorities Outsourcing Work to Lower-Tax Countries

May 19, 2006

In a hilarious confirmation of the power of international tax competition, Forbes.com reports that Swedish tax authorities have been dodging Sweden’s notoriously high tax burden by outsourcing production of television ads to low-tax Estonia. Ironically, the ads are designed to encourage Swedish taxpayers to “pay on time.”

According to the story, the agency also regularly outsources production of print brochures to lower-tax Finland. From the article:

The Swedish tax authority has admitted it produced a television advertisement encouraging taxpayers to pay up on time, in low-cost Estonia, partly in a bid to escape high Swedish taxes, reported the Local.

The ads, featuring popular comic Johan Wahlstroem, would have cost 50 to 100 pct more to make in high-tax Sweden than they did in Estonia, said Bjoern Tennholt at the Swedish Tax Authority (Skatteverket).

‘Of course, Sweden is a high-tax society,’ said Tennholt.

He admitted the high cost of doing business in Sweden had also led the tax office to make films in Barcelona and Majorca, and print brochures in Finland.

According to the latest Eurostat figures Sweden has the highest tax burden in the EU at 50.5 pct of GDP in 2004, up from 50.2 pct in 2003.

The average tax rate for the 25 EU countries was 39.3 pct of GDP in 2004 versus 39.5 pct.

The rapidly growing Slovakian, Polish and Estonian economies also have the lowest tax burden in the EU.

According to a report in Dagens Industri, Sweden has lost 60,000 manufacturing jobs since 2001 as Sweden’s blue chip manufacturers—like the Swedish tax office—opt to produce in lower cost countries.

Read the full piece here.

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