Britain long ago surrendered its dubious pride of place as the heaviest taxer to Sweden. In 1976, Britons enjoyed the spectacle of Swedish filmmaker Ingmar Bergman fleeing to their country in search of a tax haven! In comparisons among nations, Sweden holds the world record, claiming half of its gross domestic product in taxes.
Surprisingly, corporate tax burdens are high in socialist Sweden – even by U.S. standards. And many of the wealthy also escape heavy taxation. The reason: Sweden uses its tax code aggressively to encourage government-approved investments (e.g., in steelmaking or shipbuilding) that promote economic stability. Perhaps because it never experienced the sharp break with feudalism that most of Western Europe did. Sweden is the ultimate ‘nanny’ state. Capital invested ‘properly’ is taxed lightly; investments not deemed to be socially useful (e.g., yachts, private estates, jewelry) are taxed at confiscatory rates. Likewise, while Sweden claims much of its citizens’ personal income, it gives much back. In the United States, many government benefits are means-tested; but 75 percent of all Swedes receive some sort of benefit – family allowances, tuition assistance, job training.
West Germany funds a large share of its social welfare outlays, as it did in Bismarck’s time, through regressive payroll taxes. Like Sweden, it uses tax incentives to lower certain burdens on the wealthy. Capital gains on stocks and bonds, subject to a tax of up to 33 percent in the United States, are exempt in West Germany – as well as the Netherlands, Belgium, and Japan. (But the United States, virtually alone among Western nations, leaves gains from the sale of one’s home, in most cases, untouched.)
In France, one of the most heavily taxed nations in Europe, successive governments after World War II clung to the tradition of indirect taxation. France adopted a value added tax (VAT), a consumption tax on goods and services, in 1954, more than a decade before the rest of Europe. The French, like other people, have shaped the tax system to reflect their culture. Wine is taxed at a lower rate than mineral water or Coca Cola; a tax on yachts, horses, limousines, and other ‘signs of wealth’ remains as a legacy of the Revolution.
