The interest deductions in Sweden cost billions

 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?

Below is a table showing the cost of the interest deduction for the past 4 years:

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.

But how do we spend GDP then?

These days it is written that the GDP will increase by relatively high numbers on an annual basis. It sounds like things are going well for Sweden and the Swedes and that everything is better than ever.

But there are some problems that are forgotten in the general euphoria.
First of GDP as a measure: GDP measures the sum of goods and services consumed in Sweden, plus exports and less imports. One question you should ask yourself is what is the quality of consumption? A couple of quick examples: Your car breaks down - you get it fixed, merger affects GDP positively, but if the car has not broken (better quality car, better road conditions) had been lower GDP. IS it better with inferior products! Example two is even more clear: You get sick because you have no mortgage and therefore ill-treated, the care you receive is positive for GDP, so the GDP measure is positive that you suffer. Both are clear examples of how imprecise measure of GDP is but because of quality-based measures are very difficult to get used the simple GDP measured on a daily basis. The danger, however, if one interprets the GDP as a measure of absolute improvement and success - then you are absolutely wrong.

The second problem we must not forget is the division of the profit from the growing GDP. If it had been allocated "fairly" would have probably resulted in a greater improvement in living standards and life-value than with the unequal distribution we have in Sweden and many other countries today. It's probably pretty obvious that the raising of the lowest paid from revenues of SEK 1,000 per month represents a major lyckohöjare than one of the Vallenberg clan add a billion to the bank account.

This is not to imply that GDP growth would be negative on the contrary - but the contents of it and how it is distributed should also be discussed.

The more choices the better?

I started my Sunday morning with breakfast and including GP (www.gp.se) in the breakfast is definitely more comfortable with the paper edition than the online one. Anyway, among the things that interested me was an article on occupational pensions.
The title "Difficult to choose the wrong pension" (the online version of "Easy occupational choice") was amusing, given that already in the first paragraph refers to a study done AMF pension that gave the answer that only 15% of privately employed workers feel that they have the sufficient knowledge to make their choice. But with a style of a parent Anna Björe clams us down in the next breath, and says that it is not so difficult you might think. No, it must of course be that the workers feelings are wrong and it is only because due to the fact they are uninformed. That means just give them the right information about the economic context and development on a 40-year term basis (when pensions are to be transferred back) and all will be transparent and easy. Tiring, I think it's so easy to just write that and not instead consider whether the intended choice might not be desirable for those who are forced into taking it.
Why shouldn't we be offered the choice to avoid these decisions more actively? What do we have our collective society for, if not including the simplification of our lives? Perhaps it is more people than I who think that electricity, telephone, pension, etc. may well be arranged in a collective manner? What if instead I could go in for decisions that matter to me as those including human relationships - family, friends and the rest of humanity for that matter. Less time on the financial management and buying/selling and more of what gives value to remember on the evening before falling asleep and in the morning when you wake up. Am I unique in the idea that human encounters is more important than economic choices? A frightening thought!
The article explains to the less knowledge you'll find here!
Press release on the AMF investigation you can find here.

Ericsson hires 6000!

For a company that actively worked to cut its workforce and managed very well the last few years, it is certainly disruptive to that path to hire 6000 employees. But thats one result of the latest in a line of larger deals Ericsson has made. Ericsson has signed an agreement with Sprint to take over the daily responsibility for the design and operation, activation of services, and maintenance of the Sprint-owned CDMA-and idea-networks and the fixed network. What was originally a Swedish-owned Ericsson will also optimize the U.S. Sprint's assets from multiple vendors and provide processes and tools to manage the national online platforms and operational support system. The deal means that around 6000 Sprint Employees will become Ericsson employees at Ericsson Services in Kansas, in the third quarter of this year. Read Ericssons press release

This event comes soon after the recent deal in China, where Ericsson has signed an agreement with Chinese operators worth a total of 1.7 billion dollars, corresponding to approximately SEK 13.6 billion. In this way Ericsson is linking together one world economic power with the other within their company.

I also want to fit in and remind you that Eniro is still larger than Hitta.se with more than 5.3 million visits in Eniro.se against Hitta.se closely at exactly 5.2 million visits. (5 368 450 / 5 200 199). I wonder if there will be no faith or parcel of Eniro will succeed with their online venture. It is no easy challenge they face to convert offline to online, while maintaining profitability, but it's an organization with strong sales and they have managed to renew their activities sooner.

Eniro.se still on top of Hitta.se

As I wrote a while ago, it appeared that the news of a change between the two search engines Hitta and Eniro was to early to be announced as Eniro peaks again! Of course I can be wrong and therefore I do a follow-up now, a few weeks later, to see if this was the case. The images below are cropped screenshots from Kia index showing Eniro and Hitta figures for visitors. As shown Eniro is still superior to Hitta even if the difference is not that big.



On second thought, not so big is not true, the difference is about 200 000 visitors per week which means that only that difference is greater than total number of unique visitors for the whole lot of 302 of the 364 websites that provided figures on Kia this week.
Another interesting figure one can notice on Kia-list is that visitors watched an average of 3.4 pages on Hitta but not less than 4.4 of Eniro. This actually gives Eniro.se 5 million more page views than Hitta.se or approximately 20% - a non-abject difference that certainly affect the prospects for advertising sales positively. But honestly, it should be said that that can be both positive and negative figures with indicated more pageviews per visitor. It may indicate a more attractive service that invites to use the additional features etc, but it can also indicate a more difficultly used service that requires more pages to get the answer searched. Would it be the latter in Eniro's case will of course Hitta.se win in the long run but if it is the first case Eniro will win on the case that their visitors are more satisfied. We shall see what happends in the future. Both of them want to get enough distance to the other and both are investing heavily in a time of slump. It will require substantial power to determine the whos the winner, both in resources and perseverance, the question is whether both parties want to spend what it takes or if either side "blinks" when it comes to the test?

Eniro peaks again

Martin Havner at the newsagency Direct told us the second week of January the news that Hitta.se overpast Eniro in KIA index. Perhaps it is a novelty that Hitta.se managed to climb up on top, but to make it a headline that the "Trend broken" does not show in any depths of journalism. Already the week after the news where outdated when Eniro, which dip over the holidays, re-took first place. As the picture below shows (graph from Kia index), it was hardly a break of any trend and the second week of the year are the figures for unique visitors following: eniro.se 2 607 772 against Hitta.se 2 467 144. Both numbers are unique browsers, certainely a controversial measure, but nevertheless the Direct article was based on them.


However, as Martin clarify the picture when he at the end of the news suggests that Eniro's decline may be due just to their visitor demographics, the professionals who use Eniro when they are on their jobs simply does not during Christmas time. That is probably the explanation to the temporary decline. Interestingly, Eniro's share price soon after the news went down temporarily but soon came back up. Is this perhaps an indication on that the more devoted went to KIA and checked out the article source material? It suggests, in this case that the source of criticism and common sense exists among stock market players even in these days of unrest.

A blog on the economic and legal events

There are many, many more blogs on the gossip and fashion. But financial and legal ideas are influenced of personal taste and thoughts, after all its not that the stock market and the courts are always perceived as logical and above all doubts about the fairness and reason. So why not combine a blog about these two entities with gossip and opinions on them? No exactly my thought, so thats what will be provideded in this blogs future.