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High taxes forcing Swedish companies to flee abroad.

Some of Sweden's biggest companies are thinking of moving abroad to flee high taxes, threatening the country's Social Democratic government with a rise in unemployment and loss of tax revenue in an election year.

The list of companies said to be considering a move is topped by telecoms group Ericsson and industrial gases group AGA. Some firms, encouraged by mergers with foreign partners, have already left.

The Social Democrats, facing a general election on September 20, have vowed to increase spending on social programmes after years of painful fiscal tightening which eroded Sweden's showpiece welfare state.

Industrialists complain the government is not doing enough to stop companies from leaving.

High taxes hit companies' bottom lines and make it harder to recruit foreign managers and researchers. Companies also say they could benefit by being closer to key markets.

Gone are the days when Swedish companies will show a blind loyalty to the country's blue and gold flag, analysts warned.

The debate re-emerged this month with renewed speculation that Ericsson, the largest company by market capitalisation on the Stockholm Stock Exchange, would move its head office to London.

Ericsson, which employs 45,000 people in Sweden, said it was looking for a place for its British marketing operations but no decision had been made about moving its head office.

The Swedish Prime Minister, Mr Goran Persson, responded by saying the Wallenbergs, Sweden's most powerful industrial family, who have significant stakes in the country's leading companies including Ericsson, had assured it would stay in Sweden.

The Swedish Federation of Industries said Swedish companies suffer from oppressive taxation coupled with a lack of qualified young people to fill jobs.

"The government believes traditional Swedish companies are blue-gold and will not move. We say those days are over and these multinational companies will invest where the best climate is," the Federation's deputy director general, Mr H G Wessberg, said.

"Comments by the government make us think they do not understand the problem."

Tax Minister Mr Thomas Ostros said his office was preparing a paper that would introduce benefits such as tax breaks for specialists who come to work in Sweden for short periods.

Swedish taxes amount to 68 per cent of an executive's annual income of pounds 30,000, according to the Swedish Employer's Federation. In Britain this would be 47.5 per cent.

"We have a very relaxed discussion between big business and government in Sweden. We believe we have a situation in Sweden that is very beneficial for a lot of companies," Mr Ostros said.

"They would not have grown so strong and so big if we had a bad business climate."

However, Mr Wessberg said a tax break for guest workers was not the solution. The real problem was the 1994 re-introduction of a tax called varnskatt aimed at high income groups, he said.

"In the long run it is not good to have separate rules for foreigners and Swedes. It is not good for morale in companies."

It would not be a problem for the current government to eliminate the varnskatt, Mr Wessberg said.

But in the run-up to the election the Swedish union federation LO, an integral part of the Social Democrat movement, is campaigning against further cuts in Sweden's welfare provision for disadvantaged groups such as the unemployed and single parents.

Moves abroad could could drive up Swedish unemployment, which was running at 6.7 per cent in February.

AGA said it was constantly reviewing whether to relocate its head office, though it has decided to stay put for the time being. The company was looking at a dozen factors when considering a move, including taxes and recruitment, said spokesman Mr Maris Sedlenieks.

For drug company Astra, the second largest company on the Stockholm bourse, the issue is more the need to attract qualified research and development staff. It has already shifted some of its research operation abroad.

In 1994 about 25 per cent of R&D was outside Sweden but this is now 45 per cent.

"We have big problems trying to recruit qualified scientists to come to Sweden. This is part of the reason why we have extended our research internationally," said Astra spokesman Mr Staffan Ternby.

Rival Pharmacia & Upjohn, which decided to move its head office to New Jersey as it changes its focus to the US market after a merger, had a similar complaint.

"It would be better if they could reduce taxes for researchers who stayed two, three or four years. That we have said many times," said spokesman Mr Soren Densjo.

Car safety equipment maker Autoliv, formed through the 1995 merger of Sweden's Autoliv and US Morton Automotive Safety Products, decided to have its base in London.

At the time the decision was made it was assumed an American would head the company, although Swede Mr Gunnar Bark is now chief executive.

"We have started an office in London for those who want to work from London. This means we give people an alternative," Autoliv spokesman Mr Mats Odman said.

"There will be more non-Swedes working for the company. It may be difficult to convince non-Swedes to come here and have the privilege of paying Swedish taxes."
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Publication:The Birmingham Post (England)
Date:Apr 4, 1998
Words:864
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