Survival of the Richest

Sweden
Taxation
Global solutions
Tax treaties
Until recently, it has been unclear what model Sweden is
using when negotiating tax treaties with developing countries.
According to the Ministry of Finance, Sweden uses a mix of
both OECD and UN models in allocating taxing rights, as well
as country specific tax treaties. The majority of Swedish tax
treaties have limitation of benefit (LOB) clauses, which is a
type of anti-abuse clause. Some of these clauses are general
and some are targeted, 755 but none of them address the key Conclusion
concerns about tax treaties – namely that they undermine
taxing rights and lower the tax rates of developing countries.
Sweden has not made a spillover analysis of how the existing
treaties between Sweden and developing countries impact
on these countries, and there are no plans to conduct one.
Each negotiation is held in a bilateral context. According to
the ministry, this means it "is reasonable to assume that
any agreement that is reached is considered to be in line
with the priorities of both contracting states." 756 However,
Swedish radio has revealed that Sweden has several
treaties in force that substantially reduce the taxes paid by
Swedish companies operating in low- and middle-income
countries. 757 The same conclusion was reached by ActionAid,
which identified four so-called ‘very restrictive’ tax treaties
between Sweden and developing countries. These kinds of
treaties include strong limitations on the taxing rights of the
developing countries that are signatories. 758 For example,
ActionAid estimates that a tax treaty with Sweden cost
Bangladesh more than US$826,216 due to lower tax income
on dividends alone. 759
At the moment, Sweden has 42 tax treaties with developing
countries, which matches the average among the countries
covered in this report. The average rate of reduction of
tax rates within those treaties – 4.2 percentage points – is
above average (which is 3.8 percentage points). 760
Harmful tax practices
In the study on aggressive tax planning structures
commissioned by the European Commission, Sweden
is found to have a total of eight indicators, which is
significantly below the 10.6 EU average. Sweden does not
have – and does not plan to introduce – a patent box, and no
other active indicators were found. 761
Sweden offers advance pricing agreements (or ‘sweetheart
deals’) to multinational companies, but the Ministry of
Finance does not disclose the number of rulings. 762 However,
according to European Commission statistics, Sweden had five
agreements in force at the end of 2014, and seven at the end of
2015. 763 This is relatively low compared to other EU countries. 764
As was the case during the Financing for Development
meeting in Addis Ababa in July 2015, Sweden still does not
support an intergovernmental body on tax under the UN.
The government does not believe a global tax body would
receive full legitimacy and enough resources to achieve its
purpose. 765 Instead, the government supports strengthening
the UN expert committee on tax by "pushing for staff
reinforcement in the secretariat." 766
During 2016, the Swedish government has paid lip service
to the urgency of tackling tax dodging, but in practice it
has taken very few of the necessary steps to address the
problem. The government is still not supporting public
country by country reporting, and is undecided on the issue
of public access to information about company ownership.
Another cause for concern is the Swedish tax treaty system,
in particular since several of the treaties, which Sweden has
signed with developing countries, qualify as ‘very restrictive’.
On a positive note, Sweden only has a few harmful tax
practices and has only signed a low number of advance
pricing agreements with multinational corporations.
However, it is problematic that Sweden still opposes the
creation of an intergovernmental UN tax body, which would
give developing countries a chance to participate on a truly
equal footing in the setting of global tax standards.
Survival of the Richest • 93