Professor Sven-Olof Lodin is a distinguished and internationally renowned tax scholar. He is the former President of the International Fiscal Association. For more than 40 years Professor Lodin has been extremely involved in the development of the Swedish tax system as a member of over 20 Government Commissions and working parties on taxation. Sven-Olof Lodin has an extraordinary insight into the political processes.
The Making of Tax Law
The book, describing the development of the Swedish tax system and how it came about will be of interest also on an international level. Researchers in the fields of taxation and political science, governments and those involved in tax policy matters, as well as those interested in gaining a better understanding of how political processes function will find this book a value resource. A great deal about political processes and the reasoning behind technical solutions and their success or failure can be learned from the book.
Sve n- O lo f Lodin
In The Making of Tax Law Sven-Olof Lodin describes how the Swedish tax system has evolved since World War II and how political parties, and to a greater extent how individual politicians, influential lobbyists, special interests and other groups involved in the legislative process, have acted and influenced the final result. Sven-Olof Lodin himself has been described as the most influential actor in Swedish tax policy making outside the Ministry of Finance.
The
Making of
Tax Law The Development of Swedish Taxation
Sv en- Olof Lo d in IUSTUS FĂ–RLAG ISBN: 978-90-8722-108-9
Lodin.Tax.Law.hela5.indd 1
ISBN: 978-91-7678-794-6
8/29/11 1:52 PM
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The Making of  Tax Law: the Development of the Swedish Tax System
by
sven-olof lodin
Translation by
ken schubert
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In all countries, except the countries mentioned below, sold and distributed by: IBFD P.O. Box 20237 1000 HE Amsterdam The Netherlands In Sweden, Norway, Finland, Denmark and Iceland sold and distributed by: Iustus Förlag AB Box 1994 751 49 Uppsala Sweden This book is a joint publication between International Bureau of Fiscal Documentation (IBFD) and Iustus Förlag AB IBFD Iustus Förlag AB P.O. Box 20237 Box 1994 1000 HE Amsterdam 751 49 Uppsala The Netherlands Sweden Telephone: 31-20-554-0100 Telephone: 46-18-65 03 30 Fax: 31-20-622-8658 kundtjanst@iustus.se www.ibfd.org www.iustus.se © The author and Iustus Förlag AB, Uppsala 2011 ISBN: 978-90-8722-108-9 (IBFD) ISBN: 978-91-7678-794-6 (Iustus) Jacket: John Persson Typesetting: Harnäs Text & Grafisk Form Printing house: Edita, Västerås 2011
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Table of Contents Preface to the English Edition 7 Preface 9
SECTION 1 INTRODUCTION 13 Chapter 1. Introduction to the Swedish Political System and the Scope for External Influence 15
SECTION II From Wigforss to Feldt: Fiscal Trends in Sweden, 1948–1990 27 Chapter 2. Wigforss and the 1948 Tax Reform 29 Chapter 3. The Interventionist Era 33 Chapter 4. Gunnar Sträng and the Great Leap of Income Redistribution 38 Chapter 5. The Wonderful Night and the Degeneration of the Tax System 50 Chapter 6. Progressive Expenditure Tax: An Alternative? 56
SECTION III The Tax Reform of the Century 71 Chapter 7. Designing New Corporate Taxation 73 Chapter 8. Designing New Individual Taxation: To Be Financed by Higher Consumption Taxes 93 Chapter 9. Political Implementation 103
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SECTION IV DEVELOPMENT AFTER THE TAX REFORM 119 Chapter 10. Some Important Battles after the Tax Reform 121 Chapter 11. Abolition of the Inheritance Tax and Retention of the Wealth Tax: A Discussion of Income Redistribution Policy 133 Chapter 12. The Issue of Property Taxation 147 Chapter 13. Taxation of Close Companies: A Never Ending Headache 162 Chapter 14. Fiscal Policy of the Moderate/Liberal Government between 2006 and 2010: Views on the Current Tax System 176 Chapter 15. The Tax System of the Future: What Needs to be Done? 186
SECTION V Taxation in the EU 205 Chapter 16. EU Fiscal Policy: Lack of Progress 207 List of Tables and Figures 227 Annex. SEK in relation to foreign currencies 228
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Preface to the English Edition Professor Sven-Olof Lodin is a distinguished and internationally wellknown tax scholar. He is also former President of the International Fiscal Association. For more than 40 years, Sven-Olof Lodin has been heavily involved in the development of the Swedish tax system as a member of over 20 government Commissions and working parties on taxation. A large portion of his book, Professorn som blev näringslivstorped – min tid i skattepolitiken [The Professor who became a business lobbyist; My life in tax politics], describes how the Swedish tax system has evolved and why it evolved the way it did since World War II until today. He shows that much more of the development than usually is expected depends on a limited number of strong actors, especially ministers of finance but also other actors, than on tax policy outlines and formal tax policy decisions within the political parties. Sven-Olof Lodin has had an extraordinary insight in the political process. In his book, he describes how the political parties, and to a greater extent individual politicians, influential lobbyists, special interests and other groups involved in the legislative process have acted and interacted, and the reasons behind their activities. Also, Sven-Olof Lodin himself has been an important actor. In reviews of his book he has been described as the most influential actor in Swedish tax policy making outside the Ministry of Finance. For the reader, Lodin’s book gives a much better understanding of not only the Swedish political process but also of why the Swedish tax system has developed the way it has during the last 60 years. Much concerning political processes and reasons behind technical solutions and their success or failure can be learned from it. Internationally, this description of the development of the Swedish tax system and how it came about should be of great interest not only
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8  Preface to the English Edition
for researchers in the tax field or in political science, but for governments and all involved in tax policy matters or who are interested in how political processes function. Hugh J. Ault Professor of Law Boston College Senior Advisor Centre for Tax Policy and Administration, OECD
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Preface Excerpt from the preface of the original Swedish edition of Professorn som blev näringslivstorped – min tid i skattepolitiken (The Professor who became a business lobbyist – my time in tax politics) Journalists and many others hounded me for a couple of years with their pleas: “You’ve been a player in the fiscal policy game for 40 years and have witnessed it from the inside out. Politicians write memoirs all the time. But nobody outside their intimate circle has described how public policy is formulated. You’ve simply got to write a book about your experiences”. I cannot say whether this book turned out to be what they were expecting. But here it is, the fruit of my labours since I sat down at the computer of the lovely writer’s cottage of the foundation Stiftelsen Företagsjuridik just inside the Visby city wall back in early summer 2008. This book focuses on my involvement in fiscal policy making and the various reforms that Sweden has adopted through the years. I describe my observations of, and interaction with, political parties and interest groups, particularly politicians and other individuals. Although fiscal trends and policy are the central topic, I do not conduct a scholarly examination of their evolution since my involvement in the early 1970s. Given that the results and processes are closely intertwined, however, the book is occasionally more technical than I would have preferred. Because I have been engaged in a number of different fiscal policy a reas, both nationally and internationally – often in an attempt to identify new system solutions as a response to evolving social and economic trends – the book takes a series of detours to more general topics. O ccasionally, I was exposed to other kinds of experiences altogether, which unexpectedly helped me in my subsequent efforts. Familiarity with my journey from an academic fiscal researcher to a participant in public policy making is integral to understanding my approaches and viewpoints.
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10 Preface
The fact that I never kept a diary made writing this book that much more challenging. But the 150 opinion pieces I have published in newspapers, as well as my books and articles about tax legislation, helped me remember and assign a date to the events in which I was involved. Writing the book also taught me that the deeper one digs, the more long-buried episodes rise to the surface. A common belief is that the general outlines of fiscal policy are drawn at party congresses or as part of long-term political platforms. In point of fact, many fiscal policy trends in recent years have not evolved that way at all. When Minister of Finance Kjell-Olof Feldt, Prime Minister Ingvar Carlsson and the rest of the Cabinet realized what URF and RINK (the two government commissions that carried out the inquiries and drew up the major 1991 tax reform were Utredningen om reformerad företagsbeskattning (URF) and Kommittén för reformerad inkomstbeskattning (RINK)) – were about to propose, their first reaction was surprise and alarm. But once they grew accustomed to the idea, they supported the proposals. Not even the new energy tax structure in the early 1990s was designed through political deliberations. A proposal to abolish the inheritance tax would have had no chance of approval by the congress of the Social Democratic Party, which is the highest deciding body of the party. Thus, individuals – both in and outside the political realm – have enjoyed great latitude for action. This makes it particularly interesting to study this dynamic, which has generally played out behind closed doors. … Finally I want to express my gratitude for all the assistance I received while I was writing this book, including many people whose first-hand experience of various events could either confirm or pad my recollections. I mention some of them by name in the course of the book. Others proofread my manuscript to make sure that my story held water, and bolstered my self-confidence whenever I lost my sense of direction.
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Preface 11
I received grants from the Bank of Sweden Tercentenary Foundation, the Torsten and Ragnar Söderberg Foundations, and TOR/Skattenytts Stiftelse. Stiftelsen Företagsjuridik generously made their writer’s cottage in Visby available to me on several occasions when I felt the need to concentrate a little extra. Above all, I want to thank my wife for all the support and patience that she has displayed through the years, particularly during the period of time that I was writing this book. Sven-Olof Lodin Postscript The Bank of Sweden Tercentenary Foundation has made this English version of the parts of this book on the development of the Swedish tax system possible by a grant for translation for which I am very grateful. I have enjoyed the cooperation with Ken Schubert of Twenty-first Century Translation and Editing AB, who has made the translation to English with great skill and accuracy for which I am grateful.
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SECTION 1 INTRODUCTION
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chapter 1
Introduction to the Swedish Political System and the Scope for External Influence The institutional conditions, as well as the political system and associated power structure, of a particular country strongly affect the creation and design of its fiscal legislation. This chapter presents a brief introduction to Swedish political and institutional life as a foundation for understanding its effect on fiscal trends and the legislation with which they are related. Sweden is a monarchy. The king or queen is head of state but has only ceremonial responsibilities. Thus, the prime minister is the individual with the greatest political power. Sweden has a parliamentary form of government in which a unicameral parliament (Riksdag) of 349 members is the highest legislative body. The Riksdag appoints the prime minister, who appoints the other Cabinet members. If a vote of no confidence passes the Riksdag, the entire Cabinet must resign, underscoring the exceptional status of the prime minister. The current Riksdag consists of eight parties. For a long time, there were only five. The Social Democrats have been the largest party since the end of World War II and have been in power for nearly 80 % of that time. Although the party has enjoyed a parliamentary majority for only brief periods, it has been able to govern on its own, primarily with the support of the Left Party (the former Communist Party) and the non-Socialist Centre Party (the former Farmers’ Union). Non-Socialist Âcoalitions ruled from 1976 to 1981 and from 1991 to 1993. The Social Democrats subsequently returned to power but without a parlia-
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16 Chapter 1 Introduction to the Swedish Political System …
mentary majority. The party lost the 2006 election to a centre-right coalition with a parliamentary majority. The centre-right parties won again in 2010, defeating a coalition of the Social Democrats, the Green Party and the Left Party. Nevertheless, the current Government lacks a parliamentary majority due to the Sweden Democrats, a xenophobic, nationalist party that was elected to the Riksdag for the first time and is unaffiliated with either bloc. Governments that fail to win a parliamentary majority have managed to rule by means of agreements with other parties. Generally speaking, broad agreements have been reached when it comes to foreign policy; defence; the basic structure of the social insurance and healthcare systems; and other major national issues. Notwithstanding the Riksdag’s status as the highest legislative body, the Government rules the country in practice. The Riksdag frequently tinkers with Government bills but rarely rejects them. Discipline is strict within the parliamentary parties. Thus, the parties are in a strong position. Individual Riksdag members seldom act on their own and are poor conduits for affecting parliamentary resolutions from the outside. Not even the chairman of the Parliamentary Committee on Taxation has the kind of power typical of the chairman of the House Ways and Means Committee in the United States. No Riksdag member has anything approaching the influence that a US Senator can exert. The minister of finance is traditionally the most powerful of approximately 20 Cabinet members, occasionally more powerful than the prime minister. As a result, the position is usually held for a long period of time by someone with a strong personality. Fiscal trends are largely shaped by the minister’s personal preferences. The most important changes to the Swedish tax system during the past 60 years have occurred under five powerful minister of finance. Given that their policies are central to the themes of this book, a short introduction to these men should prove helpful at this point. Ernst Wigforss was a humanist and radical socialist, holding a PhD in Nordic Languages and originally from southern Sweden. As Social Democratic minister of finance for a total of 19 years, between 1926
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Chapter 1 Introduction to the Swedish Political System … 17
and 1949, he designed both the tax system during the war and the major reforms adopted thereafter. Gunnar Sträng, a self-taught farm worker and union representative, was a Social Democratic Cabinet member for 31 years, including 21 years as minister of finance (1955–1976). A highly pragmatic politician and fascinating speaker, he helped turn Sweden into a high-tax country and brought about the adoption of major welfare reforms. The Swedish tax burden rose from below 30 % to above 55 % of GDP on his watch. A number of reforms aimed at stimulating the manufacturing sector were also adopted. In addition, he introduced the value-added tax and individual taxation of spouses. When the Social Democrats returned to power in 1983, economist Kjell-Olof Feldt, who had been an undersecretary at the Ministry of Finance for many years and subsequently minister for trade, was appointed minister of finance. He left the Government in 1990, frustrated by his inability to win support for his fiscal austerity plan, which was needed following deregulation of the credit market in 1983 and the foreign exchange market in 1986. Both markets had been strictly regulated since World War II. Nevertheless, he pushed through the “tax reform of the century” that took effect in 1991 and radically simplified the Swedish tax system. The highest marginal income tax was lowered to 50 %, from 80 %. The measure attracted great international attention and affected fiscal trends in a number of countries. Finland and Norway were among those that later adopted comprehensive reforms along the same lines. Göran Persson, long a local politician who had a short stint as ministerfor education, was appointed minister of finance after the Social Democrats won the 1994 election. He held the post until the 1996 election, after which he served as party chairman and prime minister until the Social Democrats were defeated in 2006. As prime minister, he continued to exert more influence than anyone else over fiscal policy, and initiated a number of changes to the tax system. As minister of finance, he aggressively reorganized public finances. Persson was a brilliant speaker and an extraordinarily resolute politician.
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At the age of 38, Anders Borg was unexpectedly appointed as minister of finance after the centre-right coalition came to power in 2006. Since that time, he has substantially lowered the income tax, bringing Sweden’s tax burden down to 46 %. An economist by training, he has held various positions with the Riksbank and in the financial markets. He served as a political expert for several years in the right-centre government of the early 1990s. Later on he was research director with the Moderate Party. Particularly during the global financial crisis in 2008–2010, he has turned out to be a skilful and effective minister of finance. Despite his ponytail and gold earring, he is highly esteemed within the EU. Government decisions in Sweden are made collectively by the e ntire Cabinet rather than by individual members. The minister of finance, and thereby the entire ministry, enjoys a very strong position and maintains total control of the government budget, including the expenditures of the other ministries. They have to negotiate their budget limits, and frequently individual items as well, with the Ministry of Finance. Thus, the minister has great influence over all expenditure areas. As a result, civil servants in the ministry are typically self-confident and reluctant to listen to the proposals of outsiders. The “Not Invented Here Syndrome” that is so pervasive at the ministry poses a serious challenge for anyone else who wants to influence its decisions. Like the rest of the ministries, the Ministry of Finance is small by international standards. One reason is that government agencies are independent and not part of a particular ministry. Another reason is that specially appointed committees generally prepare major policy decisions on behalf of the Government. Government directives, detailed or not, set the focus and objectives of the committee’s enquiry. While the task of a committee is usually to identify technical solutions, it sometimes has the authority to take political stands as well. From a political perspective, committees that include Riksdag members from all or some of the parties are the most important. An expert committee is made up of a chairperson, usually an attorney, and a number of specialists. Another variation is a committee of one, consisting of an investigator and an
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Chapter 1 Introduction to the Swedish Political System … 19
expert staff. The committees often include representatives of labour and management, along with other interest groups. Such inquiries are the primary means by which these groups can influence tax legislation. They have a second chance as well, given that virtually all draft reports submitted to the Government are also sent to agencies and interest groups concerned for comment. However, interest groups normally have only a limited ability to change a proposal at this point. The above account makes it clear that the ruling coalition parties, Government, minister of finance and civil servants firmly control the system by which fiscal legislation is formulated. Moreover, Swedish legislative methods are based on continental traditions. Each law includes theoretical principles that are as clearly stated as possible. Any amendment that is at odds with the overall principles stands out in a way that hinders its adoption. Legislation in countries with a common law tradition often uses practical examples to illustrate principles. As a result, legislation sometimes treats ostensibly similar situations in the same way although the principles would dictate otherwise. References to such look-alike situations are often exploited by special interests and lobbyists to obtain more favourable legislation, especially with regard to the extension of favourable tax treatment, such as depletion allowances in the United States. Given the above considerations, the assertion in the preface to this book that many recent trends in fiscal policy have not originated from either party congresses, long-term political platforms or Government platforms, may be difficult to understand. However, a few powerful ministers of finance have not been the only people to exert major personal influence on the legislative process. Despite the barriers thrown up by the system, individuals – both in and outside the political sphere – have acted effectively behind the scenes. One purpose of this book is to describe my experience of participating in reform efforts, as well as my impressions of how the various parties, interest groups, politicians and other individuals have shaped the end results of the legislative process. The methods and influence of the Swedish lobbying system are particularly relevant in this regard.
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Scope for lobbying in the Swedish political system The political system of a country determines the degree to which external interest groups can affect legislation by means of lobbying. The strength of Swedish parties and their strict internal discipline, along with the concentration of both legislative and executive power in the Government, greatly limits the scope for lobbying. Anyone wishing to influence policy must go through the minister concerned and his or her closest associates. Persuading a few Riksdag members, or even an entire committee, to support a proposal is unlikely to do much good. The situation is quite different in many other countries, particularly those having political systems based on Montesquieu’s concept of the separation of powers, the purpose of which is to prevent hasty legislativechanges. That approach leaves a great deal of room for influencing individuals or groups in parliament. Because lobbying groups are so powerful in the United States, a popular misconception has arisen that they are strong in Sweden, as well. It is true that lobbying is also a Swedish phenomenon and can prove highly successful on occasion. But the methods it applies must be adapted to the particular conditions in Sweden. As a participant in the legislative process for more than 40 years, initially as a professor of fiscal law and subsequently as the coordinator of the private sector’s fiscal policy for 13 years, I have often thought about what makes for effective lobbying.
Lobbying as integral to the legislative process Organizations that are closely associated with the parties in power enjoy advantages that other interest groups can never achieve. The Swedish Trade Union Confederation (LO) has a symbiotic relationship with the Social Democrats and shares common historical roots. Whenever the Social Democrats are in power, the LO receives special favours and direct access to government officials. Apart from such special cases, how should a lobbyist behave to suc-
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Chapter 1 Introduction to the Swedish Political System … 21
ceed over the long term, as opposed to one isolated situation? As co ordinator of fiscal policy for both the Federation of Swedish Industry and the entire business sector, my main responsibility was to advocate for legislation that would be good for business. My sense was that I could accomplish that most effectively by promoting a tax system that made it easier for the private sector to acquire capital; stimulated growth, equity and fair competition; and made Swedish enterprises more competitive in the global market – not by trying to procure special privileges for industry. My focus on such all-embracing issues was not universally applauded. One of my main tasks was political lobbying and influencing public opinion. To avoid any misunderstanding, I should emphasize that being a lobbyist does not mean acting like a bulldozer. Successful lobbying depends not only on having a good cause to fight for, but also a well-considered strategy and effective tactics. Although my experience primarily involved attempts to influence the Ministry of Finance on fiscal issues, it should be instructive for new generations of lobbyist in other areas of political life, as well. Lobbying must be based on trust, credibility and constructiveness to be successful. The establishment of a trusting relationship requires continuity. Familiarity with one’s subject, objectivity, honesty, discretion and networking abilities are vital, as well. If one appears to be a spokesperson for special interests, one’s chances will be seriously compromised. Thus, independent consultants find themselves at a disadvantage and are less likely to obtain the results they are looking for. Both the proposals that a lobbyist presents and their effects should be more thoroughly documented and researched than one initially reveals or than politicians are expecting. Such an approach makes it easier to deal with any questions or doubts that may arise. Criticism without a constructive discussion of practical alternatives tends to lead nowhere. A good lobbyist has a clear strategy and sticks to a few realistic objectives. Nevertheless, a measure of flexibility is always in order. A good illustration of that principle is the Federation of Swedish Industry’s decision to propose a 25 % corporate tax (for which there were persuasive argu-
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ments) with the goal of bringing the rate down to 30 %. We succeeded without abandoning our principles. But aiming at the moon to hit a target down the road is not a very promising tactic. A lobbyist who employs such a strategy loses credibility and is seen as unprincipled. The more often one reaches visible goals, the more believable one becomes. In other words, symbolic gestures rarely lead to practical results. Taking one step at a time is often the preferable way to go. However, sometimes we were asked whether we might not have got further with a more unyielding attitude. We frequently received such questions when we refrained from proposing that double taxation of corporate income be eliminated as part of the 1991 reform measures. There might be some validity to the criticism, but losing one’s credibility by going too far is a high price to pay. Regardless of the political level at which a discussion is conducted, it must be kept in mind that the two sides are by no means equal negotiating partners. The powers-that-be always set the terms and conditions. Ultimately, they are free to do whatever they deem suitable and appropriate. A lobbyist must proceed from objective grounds to persuade them that his or her proposal is relevant, beneficial for the country and politically and technically feasible – if not necessarily the solution that first springs to mind. A lobbyist should never forget that politicians are experts at manoeuvring and negotiating. One cannot get one’s way by pulling out all one’s charm and other personal assets. Executives have a tendency to grossly underestimate the skills of politicians while overestimating their own. More often than not, the result is abject failure. Politicians always say that they would rather meet with “real businesspeople” than representatives of organizations. Fredrik Reinfeldt, the present prime minister, made a statement to that effect quite recently. Frequently, however, their real motive is the sense that such people are more pleasant and less threatening to deal with – or even the desire to pull the wool over their eyes by means of friendly but ambiguous statements. Not to mention the fact that a business person and politician are often equally ignorant about the specific issues in-
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Chapter 1 Introduction to the Swedish Political System … 23
volved, which can make their conversations that much more agreeable. For better or worse, a Cabinet member is always a good deal more cautious in the presence of an expert. Thus, my principle was to avoid letting a business executive meet a Cabinet member all alone. I had two additional reasons for that credo. Generally speaking, an executive lacks the technical knowledge required to correctly describe the problem under consideration or discuss alternative solutions. Furthermore, an expert observer is required who can subsequently follow up on how the issue is handled by the Government offices and pursue the matter based on complete information. The presence of an executive is most useful for stressing the importance of the issue involved. However, the expert should carry on the discussion of the details, preferably in such a way that the executive appears to be leading it. Because an expert tends to temper a Cabinet member’s behaviour through the ability to verify what has transpired and follow up on how the issue is handled by the ministry, positive results are possible. However, the atmosphere at the meeting may be less pleasant as a result. Executives commonly misunderstand a politician’s friendly, even hearty, attitude and think that they have elicited a promise or expression of support. Occasionally the consequences are disastrous. Pounding on the table and trying to teach politicians a lesson is generally just as much of a blind alley. An incident that occurred a few years after my retirement provides a ludicrous illustration of the first reason. The transition rule in connection with elimination of corporate tax liability for gains and deductions for losses on business-related shares would have generated an enormous cost item for a big company the chairman of which was among Sweden’s leading executives. The source of the problem was official intervention by another country, which considerably delayed the formal divestment of a subsidiary. The chairman announced that he enjoyed such a good relationship with Bosse Ringholm, the minister of finance under Göran Persson, that he could present his case all by himself. After the meeting was
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over, he let it be known that the problem had been solved. The transition rule would be amended. But the bill arrived at the Riksdag wholly unchanged, and its passage led to the expected costs for the companies concerned. A civil servant at the ministry’s legal division later revealed what had really happened. “That must have been the provision that Ringholm asked us to change, but we could never figure out what he wanted”. Such one-on-one meetings between executives and Cabinet members can be like the blind leading the blind. One will never reach one’s goals that way. Technical issues are also of great importance. A lobbyist should be able to describe technical solutions, at least their general outlines. Normally they should be so well researched and formulated that they can be presented in writing. Due to both principle and habit, civil servants are highly sceptical of external proposals. Unless one is able to present a decent technical solution right from the start, they have a visceral feeling that the problem cannot be solved in a way that is practical and feasible, or that any approach would be extremely complicated or contrary to the legislation’s principles. But if one can offer a technical foundation to build on, particularly if it has attracted the support or interest of higher-ups in the ministry, one will find a more receptive audience. Lobbying is not primarily a matter of personal meetings, but rather of written material that targets individual politicians, committee meetings, public inquiries, articles and other forums. Nevertheless, attitudes may change dramatically as the result of personal conversations. Direct communication with the Cabinet member concerned is the best approach, although only in the case of an important issue and almost never to raise a new one. Ministers do not like to be surprised. Contact with undersecretaries and influential politicians is often useful for discussing fresh issues and sounding out possible reactions. Both politicians and civil servants are inclined to accept lunch or dinner invitations, mostly because that is often the only extra activity they can squeeze into their busy schedules. It also provides an opportunity to leave the ministry or Riksdag unnoticed. Nobody has to know
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Chapter 1 Introduction to the Swedish Political System … 25
whom they are meeting with, and the atmosphere is more relaxed than in an office. Discretion is a virtue that usually pays off. One should never betray a confidence or leak what one finds out about what the Government is doing or the status of a particular project. Nor should one make misleading statements – granted that one does not need to reveal everything one knows. Based on my experience, politicians will trust one more if one conducts oneself in that manner. Furthermore, one will learn a lot more and may even find oneself being sought out as a sounding board. Do not believe for one minute that lobbyists can succeed simply by means of personal contact, lunch dates with politicians or networking skills. But if a politician or civil servant trusts one and one becomes known as a reliable spokesman for one’s cause, one will have readier access to the halls of power without encountering suspicion or experiencing fear of hidden pitfalls. As a result, the issue is more likely to be taken seriously at the levels that matter the most. Non-political civil servants at ministries and the tax authorities are vital to networking. They can provide one with insights about how the ministry and politicians look at things, and they are valuable inter locutors. But they rarely exert any genuine influence or are willing to bring up an issue within the ministry, particularly if an outsider has presented it to them. Some organizations boast about how much influence they exert by pointing to the number of Riksdag members they meet with or motions they write. Writing motions, especially to the opposition parties, is rarely productive. Riksdag members almost never have any significant individual influence on government policy. But if one fails to persuade the Cabinet and wants to take one last stab at it, approaching a committee chairman or a particularly influential politician may be one’s only option. Sometimes it actually works, especially if the issue is not particularly earth-shattering. On a completely different level, cultivating a personal relationship with a politician might be wise as a long-term strategy, to obtain information about what is being discussed within the party and for feeling out what reactions one’s proposals are likely to
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elicit. If the politician is subsequently promoted to the Cabinet, one is already one step ahead of the game. Notwithstanding Sweden’s highly centralized political system, the enormous power of the Cabinet and minister of finance, and the strict party discipline typical of parliamentary democracies, attempts to exert influence from the outside are by no means a lost cause. But Sweden’s legislative technique, which is based on overarching principles, limits what can be achieved.
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Professor Sven-Olof Lodin is a distinguished and internationally renowned tax scholar. He is the former President of the International Fiscal Association. For more than 40 years Professor Lodin has been extremely involved in the development of the Swedish tax system as a member of over 20 Government Commissions and working parties on taxation. Sven-Olof Lodin has an extraordinary insight into the political processes.
The Making of Tax Law
The book, describing the development of the Swedish tax system and how it came about will be of interest also on an international level. Researchers in the fields of taxation and political science, governments and those involved in tax policy matters, as well as those interested in gaining a better understanding of how political processes function will find this book a value resource. A great deal about political processes and the reasoning behind technical solutions and their success or failure can be learned from the book.
Sve n- O lo f Lodin
In The Making of Tax Law Sven-Olof Lodin describes how the Swedish tax system has evolved since World War II and how political parties, and to a greater extent how individual politicians, influential lobbyists, special interests and other groups involved in the legislative process, have acted and influenced the final result. Sven-Olof Lodin himself has been described as the most influential actor in Swedish tax policy making outside the Ministry of Finance.
The
Making of
Tax Law The Development of Swedish Taxation
Sv en- Olof Lo d in IUSTUS FĂ–RLAG ISBN: 978-90-8722-108-9
Lodin.Tax.Law.hela5.indd 1
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