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How They All Came to Love the VAT: Consumption Taxes, Big Business, and the Welfare State in Sweden

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Worlds of Taxation

Part of the book series: Palgrave Studies in the History of Finance ((PSHF))

Abstract

Several studies emphasize the importance of value-added tax (VAT) for financing extensive Scandinavian-type welfare states. This questions common perceptions of labor parties’ preference for taxing the rich. This chapter examines how Sweden came to adopt VAT, and its precursor the sales tax, in the 1950s and 1960s. The conclusion is that labor governments intentionally used this fiscal measure to achieve a comprehensive welfare state. Resistance was answered with promises of compensation for low-income households. The influence of international organizations for choosing VAT is not supported. Concerns voiced by the domestic business community about keeping up with international competition are given more weight as an explanation. Repeated appeals for reliefs from taxation of business inputs were another decisive factor in the transition from sales tax to VAT.

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Notes

  1. 1.

    Lindert, Growing Public; Kato, Regressive Taxation; Steinmo, Taxation and Democracy; Prasad and Deng, “Taxation and the Worlds of Welfare.”

  2. 2.

    Martin, “Labour Market Coordination”; Steinmo, Taxation and Democracy; Ganghof, “Tax Mixes”; Beramendi and Rueda, “Social Democracy Constrained”; James, Rise of the Value-Added Tax; Kato, Regressive Taxation; Lindert, Growing Public.

  3. 3.

    This account of general fiscal developments is based on Elvander, Svensk skattepolitik.

  4. 4.

    Ibid.

  5. 5.

    Hibbs Jr., “Partisan Theory”; Allan and Scruggs, “Political Partisanship.”

  6. 6.

    Steinmo, Taxation and Democracy; Andersson, Politics of Taxation, is a more recent contribution that also demonstrates the importance of electoral systems.

  7. 7.

    Martin, “Labour Market Coordination.”

  8. 8.

    Rodriguez, Offentlig inkomstexpansion.

  9. 9.

    Ibid.

  10. 10.

    Kato, Regressive Taxation, 31.

  11. 11.

    James, Rise of the Value-Added Tax.

  12. 12.

    Steinmo, Taxation and Democracy, 124, states that “tax politics in the 1950s and 1960s can largely be summarized in one word: boring” in reference to this as a period of consensus-oriented technocratic rule.

  13. 13.

    Ebrill et al., Modern VAT, make this association of European integration fueling the spread of VAT. It is contested by Lynch , “Harmonization through Competition?”; and James, Rise of the Value-Added Tax.

  14. 14.

    Lynch, “Harmonization through Competition?”

  15. 15.

    James, Rise of the Value-Added Tax, 177, 237f.

  16. 16.

    Steinmo, Taxation and Democracy; Steinmo, “Political Institutions.” He was followed by Kato, Regressive Taxation; and Lindert, Growing Public.

  17. 17.

    Ganghof, “Tax Mixes.”

  18. 18.

    Beramendi and Rueda, “Social Democracy Constrained.”

  19. 19.

    The Liberals are categorized as part of the political right, and the center-right opposition more broadly, relative to a socialist left-wing consisting of the Social Democrats and Communists, during the period in question.

  20. 20.

    Elvander, Intresseorganisationerna i dagens Sverige.

  21. 21.

    Rodriguez, Offentlig inkomstexpansion; Kato, Regressive Taxation.

  22. 22.

    Rodriguez, Offentlig inkomstexpansion, 109. This and other quotes translated from Swedish by the author of this chapter.

  23. 23.

    Allmänna tilläggspensionen (ATP).

  24. 24.

    Kato, Regressive Taxation, 65.

  25. 25.

    This refers to the coalition-building hypothesis (Esping-Andersen, Worlds of Welfare) in which this alliance succeeds the old one between workers and agrarians, which had been key to building the Scandinavian welfare states, but had since diminished in importance.

  26. 26.

    Ibid. Loyalty to the welfare state also forms part of the argument concerning Sweden in Lindert, Growing Public.

  27. 27.

    Elvander, Svensk skattepolitik, 303–14.

  28. 28.

    Ibid., 135–8.

  29. 29.

    Prop 1961:188, 27–8.

  30. 30.

    BeU 1961:79, 31.

  31. 31.

    BeU 1965:16, 63–4; Prop 1967:7, 13–16.

  32. 32.

    BeU 1967:2, 48–9.

  33. 33.

    BeU 1959:60.

  34. 34.

    BeU 1961:79.

  35. 35.

    Prop 1965:14.

  36. 36.

    BeU 1965:16, 51–2, 81–3.

  37. 37.

    BeU 1965:16, 52, 81, 101–5.

  38. 38.

    SOU 1964:25.

  39. 39.

    Prop 1968:100.

  40. 40.

    BeU 1968:45, 37–8, 40–2.

  41. 41.

    Prop 1940:U3, 77–94, appendix (P. M. angående omsättningsskatt).

  42. 42.

    SOU 1957:13, 154–64, 359–96.

  43. 43.

    SOU 1964:25, 779–98.

  44. 44.

    SOU 1964:25, 102–3, 106–7.

  45. 45.

    Bergquist, Sverige och EEC.

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Author information

Authors and Affiliations

  1. Department of Geography and Economic History, Umeå University, Umeå, Sweden

    Gunnar Lantz

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  1. Gunnar Lantz
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Correspondence to Gunnar Lantz .

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Editors and Affiliations

  1. ETH Zurich Institute of History, Zürich, Switzerland

    Gisela Huerlimann

  2. University of California, Santa Barbara, Santa Barbara, CA, USA

    W. Elliot Brownlee

  3. Keio University, Tokyo, Japan

    Eisaku Ide

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Lantz, G. (2018). How They All Came to Love the VAT: Consumption Taxes, Big Business, and the Welfare State in Sweden. In: Huerlimann, G., Brownlee, W., Ide, E. (eds) Worlds of Taxation. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-90263-0_3

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  • DOI: https://doi.org/10.1007/978-3-319-90263-0_3

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