Political Economy

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The Swedish government will make it more expensive to consume alcohol to pay for tax cuts elsewhere

Friday, 30 August 2013
The Swedish government will raise the price for alcohol through taxation of about 13 per cent in the autumn budget. Since tax cuts are already promised, it is looking for where to plug back that donut hole.

According to media reports, budget negotiations are already in the final stages where the tax increase is equivalent to a price increase of about Skr3 for a bottle of wine. According to the treasury department estimates, the tax increase will give Skr1.1 billion in additional revenue to the budget. Sytembolaget

But the estimates pose other questions such as the effects of fall in sales  and the risk of increased smuggling. This is because consumer goods analysts feel that the government underestimates the price sensitivity of alcohol. They believe that the introduction will increase three to five times more the prices than the Finance Ministry estimates.

The reform has been around since the alliance's election manifesto in 2010 and Anders Borg recalled the plans in spring 2011.

The minister has promised tax cuts and must look for ways to pay for it or to get revenue. However, the problem here is that if alcohol is cheaper in Denmark, then people will turn there for their purchase and also it would expand the league to smugglers.
By Scancomark.com Team

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