Interest deductions are a costly part of Swedish tax policy and affect both private individuals and the state's finances. It can be debated how sensible it is for the state to sponsor premature consumption and thus drive it up. At the same time, the borrowers are put into debt, which ties up their future consumption space. Finally, it is a banking sector that indirectly benefits as, thanks to the expanding loans to private individuals, they manage a net interest income. As we have noted in recent years, it is a fairly lucrative business. Is it perhaps time to phase out this unnecessary government expenditure in favor of a much-needed investment in the welfare sector?
Year Cost (millions of SEK) % of the State budget
2020 45,000 1.2%
2021 48,500 1.3%
2022 51,200 1.4%
2023 54,000 1.5%
As we can see, the interest deductions have made up a part of the government's expenses during these years. It may sound like a small percentage, but if we put it in comparison with the municipality and county council's request for 20 billion and the 6 billion the new ones promised, everyone can see that it would mean an addition. Maybe then we would avoid the eternal cuts and regain the welfare we once had before the annual cuts began? Finally, for those who collect these contributions to the loan burden: IF we remove the interest deductions, the inflationary pressure will decrease and thus the Riksbank can lower the interest rate corresponding to the contribution that is now paid, i.e. as a private person there would be a marginal change. The big loser in the long term is the banking sector, which would no longer be able to maintain the same net interest income. But considering the gains in the form of better welfare that everyone will benefit from and the jobs that could be created or preserved there, I think it is a simple conclusion that our politicians should adopt as soon as possible.
What is interest deduction?
Interest deduction is an opportunity for private individuals to deduct part of their interest costs from their income tax return. This applies to different types of loans, including mortgages, personal loans and quick loans. Size of the deduction:
According to current tax rules, you can make an interest deduction of 30 percent of the amount on interest costs up to SEK 100,000 during an income year. If your interest costs are higher than SEK 100,000, the interest deduction is reduced to 21 percent on the part that exceeds this amount.
