Social Democrats’ bank tax plan draws warnings over higher costs

Sweden’s Social Democrats’ proposal to increase the bank tax has been criticised by the Swedish Bankers’ Association and several major banks, which warn that the added costs could ultimately be passed on to customers, SVT reported.

The proposal would apply the tax to banks’ net interest income, the difference between their interest income and interest expenses.

Mikael Damberg, the Social Democrats’ economic policy spokesperson, said mortgage rates are currently too high and that the major Swedish banks have sharply increased their profits while households have struggled financially.

“We want to address this both through increased competition and through a temporary bank tax that goes back to households and welfare,” Damberg said.

Banks warn of higher interest rates

Several major banks have criticised the proposal, saying it could instead lead to higher interest rates. Swedish Bankers’ Association chief executive Hans Lindberg said a new bank tax would increase banks’ costs.

“As with other goods and services, one can expect the costs ultimately to be borne by customers, meaning households and companies,” Lindberg said in a written comment.

He added that higher taxation would make business investments more expensive and increase the cost of household mortgages. Lindberg has previously worked for the Moderate Party, including as state secretary to former finance minister Anders Borg.

Damberg said the Social Democrats also want to take further measures to increase competition between banks, arguing that the government has not done enough.

Asked what he would say to customers worried that costs could rise, Damberg said stronger competition was needed to prevent banks from charging excessive fees or prices.

He said many mortgage customers could see how much they pay their bank and had also noticed the banks’ large profits. That was irritating for mortgage customers, he said, who would probably like the government to take more active steps to increase competition.

How the major banks responded

Nordea said banks already pay a special bank tax, giving them an effective tax rate of about 27 percent compared with the standard corporate tax rate of 20.6 percent. Under the proposed model, the tax rate for Swedish banks would rise to about 38 percent.

“An additional bank tax therefore risks leading to higher costs for our customers, including mortgage customers, while we would also need to cut costs further in our own operations,” Nordea said.

SEB said it had no one available to comment and referred questions to the Swedish Bankers’ Association.

Swedbank declined to comment on the effects of political proposals that have not yet been implemented. It said generally that higher costs could affect its pricing.

Swedbank said it had opposed the bank tax introduced by the previous government in 2022, as well as its retention and increase by the current government. The bank said its general position was that taxes targeting specific industries and companies create uncertainty and distort competition.

Handelsbanken and SBAB had not responded to SVT’s questions.