STOCKHOLM • Wealthy Swedes face the world's highest marginal tax rates as the government begins to roll back a decade of free market reforms that made the country a favourite of investors.
Critics say the measures will make Sweden a less attractive place to do business and act as a disincentive to work.
Sweden's comprehensive but costly welfare model demands high taxes, but reforms by centre-right governments from 2006 aimed at making work pay better and trimming benefits cut the tax burden to below that in France, Finland or Belgium.
Now, the pendulum has swung again. The first full Budget under a year-old centre-left minority government - effective from January - will see Sweden overtake the Caribbean island of Aruba as the country with the world's highest marginal tax rate, of around 60 per cent.
It is part of an overall rise in taxes that is sparking controversy in Parliament, social media and newspapers.
"The government's politics are emptying people's wallets and companies' order books," said Ms Anna Kinberg Batra, leader of the largest opposition party, the centre-right Moderates.
The National Institute of Economic Research, a government think-tank, says taxes will need to rise by around 20 billion Swedish krona a year to maintain the current level of public services.
It says the overall tax take could rise to 45 per cent of economic output by 2019 from 42.7 per cent last year.
That compares with 48.6 per cent in neighbouring Denmark and 45 per cent in France in 2013, according to figures from the Organisation for Economic Co-operation and Development.
"If you raise taxes again, then Sweden will be labelled again as a country where you cannot do business, it's too expensive," said Mr Christer Wallberg, chief executive at software firm Tacton.
Top marginal tax rates will rise to 60 per cent, the highest in the world, according to consultants KPMG, from the current 57 per cent.
The top tax rate applies to those earning more than 52,500 Swedish krona (S$8,950) a month, compared with an income of £12,000 (S$26,000) a month needed for Britain's 45 per cent top rate to apply.
"The business climate has improved in the last 20 years, but I am worried that step by step we are making it worse again," said Mr Wallberg.
REUTERS
