EMCC European Monitoring Centre on Change

Sweden: ERM comparative analytical report on Public support instruments to support self-employment and job creation in one-person and micro enterprises

  • Observatory: EMCC
  • Topic:
  • Published on: 12 January 2012



About
Country:
Sweden
Author:
Jan Persson and Jenny Nordlöw
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Swedish public authorities consider the development of micro enterprises and self-employment as an engine for growth and innovation. But the general policy approach in the area of self-employment, one-person and micro enterprises are embedded in the general SME policy and not treated explicitly. Measures are commonly targeting specific groups in society, such as immigrants, youths or women, instead of specific sizes of companies. Measures that aim to increase job creation or support self-employment are primarily in the area of reduced taxes and social contributions, access to finance and counseling and efforts to create better conditions (social and administrative) for starting and running a business. Sweden has managed the financial crisis relatively well compared to other European countries and no measures leading to disincentives for micro enterprises and self-employed have been implemented as a result of the crisis. Although, the energy prices have constantly been rising the last years which is unfavourable to the development of businesses.

QUESTIONNAIRE

Part 1: Overall policy context

This section aims at giving a brief overview of the general development and status quo of the policy discussion and thereof resulting instruments, measures or initiatives in the field of fostering self-employment and job creation in one-person and micro enterprises (less than 10 employees). Focus is mainly on the developments during the last decade, that is before the global recession. In addition we are asking for your indication of change of policy focus since the recession.

1. General policy approach in the area of self-employment, one-person and micro enterprises at the national level


1.1. Has there been a policy focus/debate on the specific challenges facing entrepreneurship as tool for job creation before the global recession? If so, since when and for how long?

Table 1: Presence of policy focus/debate on entrepreneurship as facilitation for job creation before the crisis
 

Yes, continuously since 2006

Yes, on and off in the last 10 years

(Please indicate ‘X’ where it applies)

Yes, has been in focus, but since xx it is no longer part of the policy focus (Please indicate year)

No, it has never had policy focus before the recession

(Please indicate ‘X’ where it applies)

Self-employment

x

     
Hiring the first employee      

x

Hiring additional employees/creating additional jobs in micro enterprises

x

     


1.2. What is the main focus in policy documents or strategies in relation to public or social partner based support instruments for fostering self-employment or job creation in one-person and micro enterprises? (Please indicate ‘X’, multiple answers possible)

Table 2: Main focus in the policy documents or strategies
 

Entrepreneurship (Business development in general)

Job creation (Employment)

Growth (Competitiveness)

Others (please specify)

Self-employment

x

x

x

 
Hiring the first employee        
Hiring additional employees/creating additional jobs in micro enterprises

x

x

x

 

1.3. Please elaborate on the answer given above (with a focus on those developments aimed at employment creation and growth) and indicate if the financial recession has caused a change of focus:

Table 3: The policy content and significance of the financial recession
Self-employment
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Public policy approaches that aim to increase self-employment are in many ways embedded in the general SME policy and therefore treated implicitly. The policy content is primarily concerned with creating an environment and support system that will foster the emergence of new entrepreneurs and the start-up and early-stage growth of new firms. A lowering of administrative costs, access to finance and counseling are measure of focus. According to research, Sweden is gradually moving towards more entrepreneurship policy. There has been a shift from the traditional SME policy focus on providing entrepreneurs with skills and ‘production factors’ such as risk capital and expertise towards focusing more on motivation and opportunity oriented measures. In contrast to the social democratic government, the conservative government prefers a strategy that opens up many of the public sector monopolies in order to encourage entrepreneurship and thereby increasing competition.

Change due to the financial recession

Please tick:

Yes: □

No: X

If ‘Yes’, please elaborate:

Hiring the first employee
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

Policy and strategy documents do not explicitly address hiring the first employee; they rather focus on how to make it easier for companies to hire more generally.

Change due to the financial recession

Please tick:

Yes: □

No: □

If ‘Yes’, please elaborate:

Hiring additional employees/creating additional jobs in micro enterprises
Elaboration of content (please describe and also indicate whether it is treated explicitly/implicitly)

With the appointment of the new government in 2006, the policy content became more directed at making it easier and less risky for entrepreneurs to hire than it was prior to 2006, with the social democratic government. The underlying aim with the policies was to increase job creation. Efforts to encourage hiring are primarily in the area of reduced taxes and social contributions.

Change due to the financial recession

Please tick:

Yes: □

No: X

If ‘Yes’, please elaborate:

2. Disincentives for self-employment and job creation

The following two questions will investigate whether there has been a change in the political agenda which has forced new political initiatives that may result in disincentives for job creation and business development (e.g. considerations regarding public budget).


2.1 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises before the financial recession? (Please briefly describe the major developments/initiatives (max. 300 words)

According to a country report on Sweden from the Innovative Policy Research for Economic Growth (IPREG), the general tax structures, labour market structures and public-private partnerships have for a long time been rather stimulating to large-firm capital accumulation and growth in Sweden. It has traditionally been less favourable for smaller firms. The self-employment rate in Sweden is quite low, something that has to be seen in relation to the fact that the country has a high rate of public sector employment.

In January 2005, the government introduced cofinancing of sickness benefits for employers. The reform means that employers after two weeks of sick leave have to pay 15 % of the sickness benefit for full-time sick leave. The intention of the reform was to encourage employers to make efforts to reduce sick leave in the company. This reform, however, was seen by the Federation of Small Enterprises (Småföretagarnas Riksförbund)  as an obstacle for the development of micro enterprises. The new government abolished the measure in the end of 2006.

During the last decade, the Swedish energy prices have steadily increased, which are unfavourable for the labour market and employment. Energy constitutes a significant percentage of many Swedish companies' costs, particularly in the energy-intensive industries. When the costs of energy and transportation rise, it may ultimately turn against employment in enterprises. In addition, companies can become more reluctant to make new investments due to high energy prices.


2.2 Have public measures (e.g. with the aim to increase public revenue or cut public spending) led to disincentives for self-employment or job creation in one-person or micro enterprises as a result of the financial recession? (Please describe – max. 300 words)

Sweden has managed the global financial crisis and following recession relatively well compared to other European countries and no measures leading to disincentives for micro enterprises and self-employed have been implemented as a result of the crisis.

3. Representation of/lobbying for self-employed and micro enterprises


Are self-employed and micro enterprises in your national context explicitly or implicitly (e.g. entrepreneurs or SMEs in general) represented by the following types of organisations (e.g. for lobbying, defending their interest etc.)?

Table 4: Representation of self-employed and micro enterprises
 

Self-employed

Micro enterprises

Employers’ organisations

Yes, explicitly:

Federation of Small Enterprises (småföretagarnas riksförbund)

Swedish Federation of Business Owners (Företagarna)

Yes, implicitly:

Confederation of Swedish Enterprises (Svenskt Näringsliv). Target: SMEs

The Federation of Swedish Farmers (LRF). Target: Enterprises within Swedish agriculture and forestry industry

Yes, explicitly:

Federation of Small Enterprises (småföretagarnas riksförbund)

The Swedish Federation of Small Businesses (Företagarförbundet)

Yes, implicitly:

Confederation of Swedish Enterprises (Svenskt Näringsliv). Target: SMEs

The Federation of Swedish Farmers (LRF). Target: Enterprises within Swedish agriculture and forestry industry

Employees’ organisation

No

No

Not-for-profit organisations

Yes, implicitly:

Swedish Chambers of Commerce (Svenska Handelskamrarna). Target: Swedish industrial relations

Business Region Göteborg (BRG). Target: helps both existing companies and new ventures in their ambitions to grow.

Stockholm Region Business Development Target: helps both existing companies and new ventures in their ambitions to grow.

Yes, implicitly:

Swedish Chambers of Commerce (Svenska Handelskamrarna). Target: Swedish industrial relations

Business Region Göteborg (BRG). Target: helps both existing companies and new ventures in their ambitions to grow.

Stockholm Region Business Development Target: helps both existing companies and new ventures in their ambitions to grow.

Others

No

No

Part 2: Identification and description of relevant recent support instruments

The following section asks for the identification of public or social partner based support instruments initiated during or after the recent economic crisis (that is, 2008 onwards). These measures might have, but must not necessarily have been triggered by the recession. Measures may also have been initiated earlier, but changed in order to adapt to the recession or other recent developments. Rather than a comprehensive list of all instruments available at national, regional or local level, the most important, most innovative, most interesting and most effective tools are to be described. Thereof, a selection of up to three ‘Good Practices’ to be described in more detail is to be made.

1. Selection of region(s) when total coverage of the entire regional and local level is too comprehensive

When providing the brief overview and the three ‘Good Practices’ in this section of the questionnaire, measures and instruments at national level have to be included. We would in addition ask you to include regional and local level initiatives where relevant. Nonetheless, a complete coverage of regional and local levels may not be possible for all countries (e.g. because of a high degree of decentralisation resulting in a wide range of respective measures characterised by considerably heterogeneity). At the same time, it can be assumed that for instruments targeting at supporting self-employment and the creation of employment in one-person and micro enterprises the local administrative level is of considerable importance. If so, such measures will be designed to fit to the local characteristics and needs, resulting in a wide variety of different approaches. In this case, one or few local areas or regions may be selected to be covered in this report. Details on the selection are given in table 5.

Table 5: Administrative level/region(s) covered for the following research (max. 50 words per region)

Administrative level relevant for the rest of the questionnaire

National level

If a specific regional/local are is selected, please provide the following information

Name of region

 
Motivation for selecting this region

Facts about the region e.g.

- Geographic location

- No. of inhabitants

- Business structure (sector, size)

- Labour market

- Specific characteristics if applicable

 

2. Brief overview of recent instruments to foster self-employment or job creation in one-person and micro enterprises


2.1. Please provide a brief description (max. 800 words) of public or social partner based instruments recently initiated (2008 onwards) to support self-employment and job creation in one-person or micro enterprises.

Measures covered by the European Employment Observatory Review on self-employment 2010, European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities are to be omitted to avoid duplication (see Part 3 of this questionnaire).

Many instruments initiated to support self-employment and job creation in micro enterprises in Sweden are targeted initiatives, such as, special focus on female and immigrant entrepreneurship. Recent instruments to foster self-employment or job creation in one-person and micro enterprises mainly focus on:


  • Efforts to encourage hiring: Primarily in the area of reduced taxes and social contributions. For example, the government has reduced the rate of social security contributions and the corporation tax. To encourage hiring, regulations concerning capital gains in closely held companies have also been changed.
  • Efforts to create better conditions (social and administrative) for starting and running a business: A barrier for self-employment and micro enterprises have for long been the amount and complexity of government formalities and paperwork. Enterprises spend much time and devote significant resources to administrative activities. In 2010, the government decided upon initiatives, in line with EU-policy, to simplify red tape and improve administrative regulations. Another obstacle for micro enterprises has been the lack of social security for those who choose to start and run their own businesses. Starting in July 2010, the government improved the regulations around sick and maternity pay for self-employed.
  • Efforts to make it easier for companies to expand and get access to finance: Access to finance is identified as a difficulty when setting up a business and governmental financial incentives are therefore of great importance to support self-employment. Due to the financial crisis, the government initiated measures that intended to make it easier for enterprises to obtain bank loans. The state owned company ALMI Business Partner (ALMI Företagspartner) plays a dominant role in this area. In 2008, the government contributed with SEK two billion (€222 million) to ALMI Business Partner’s (ALMI Företagspartner) loan found. ALMI is also a dominant actor in the area of counseling for start-ups and existing SMEs. In addition, the government has changed the mortgage regulations and increased the maximum amount of microloans for smaller firms.

Table 6: List of recent instruments

Title

Generell sänkning av socialavgifterna

General reduction of social security contributions

Aim/objective

To improve the conditions for hiring and employment

Description of support

The Swedish social security employer contributions for employed personnel were reduced from the rate of 32.42% of the gross salary to 31.42%.

Target group

Enterprises and employed

Initiator and other actors involved

The Government and the Swedish Tax Agency (Skatteverket)

Duration (please also indicate whether the measures has been initiated due to the recession)

The measure was implemented on 1 January2009. Not initiated due to the recession.

Title

Lägre socialavgifter för unga

Reduction in social security payroll taxes for workers aged less than 26 years.

Aim/objective

To encourage employers to hire or retain younger workers

Description of support

In 2007, the government introduced a reduction in employer contributions and payroll taxes for individuals between 18 and 25 years old. In January 2009, the reduction in social security taxes for youths was extended to include youths up to age 26. The payroll tax was halved to 15.49 % and the self-employed contribution to 15.07%.

Target group

Workers aged less than 26 years old

Initiator and other actors involved

The government and the Swedish Tax Agency (Skatteverket)

Duration (please also indicate whether the measures has been initiated due to the recession)

Since January 2009 - Present. Not due to the recession.

Title

Stärkt trygghetssystem för företagare

Strengthened social security rules for self-employed

Aim/objective

To facilitate the transition from employment to entrepreneurship, strengthen security and increase freedom of choice for established businesses and make it less risky to hire. The changes are seen as a part of the comprehensive reforms which the government implements to strengthen the incentives to start, operate and develop businesses.

Description of support

In July 2010, the government introduced new rules for sickness allowance, maternity- and sick pay. The new rules affects self-employed in sole proprietorship s and partnerships. They also introduced new rules for unemployment insurance which concerns all self-employed, regardless of company type

Target group

The proposals regarding sickness and maternity pay covers mainly self-employed and exclude closely held companies. The proposals in the unemployment insurance system cover all entrepreneurs, regardless of company type.

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since July 2010. Not due to the recession.

Title

Regelförenklingar

Improve administrative regulations and cut red tape

Aim/objective

Cutting red tape is one of the government's efforts to promote more jobs in more and growing businesses. The government's overall goal of the regulatory simplification is to create a noticeable positive change in their everyday lives. A part of this includes the Government's target to reduce companies’ administrative costs by 25% until 2012.

Description of support

The government introduced an action plan on administrative simplification measures in 2006. This action plan has been updated continuously, most recent in May 2010 when a total of 1150 on-going, planned and completed simplification measures were reported, of which more than 590 were implemented during 2007-2009. Completed actions concerns areas such as VAT-reporting, accounting and archiving.

Target group

Enterprises

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since June 2009 – Present. Not initiated due to the recession.

Title

Förstärkt utlåning från ALMI till små- och medelstora företag.

Reinforced lending from ALMI to SMEs

Aim/objective

To increase the opportunities for SMEs to obtain loans from ALMI at a time when financial turmoil made ​​it harder to get financing from banks

Description of support

Due to the situation in the credit market after the financial crisis, the government decided in November 2008 on an additional capital of SEK two billion (€ 222 million) to ALMI Business Partner (ALMI Företagspartner AB)

Target group

SMEs

Initiator and other actors involved

The government and ALMI Business Partner (ALMI Företagspartner)

Duration (please also indicate whether the measures has been initiated due to the recession)

Since March 2008 – Present. The measure was initiated due to recession.

Title

Increase of the maximum amount of microloans

Fördubblat maxbelopp för microlån till små- och nyföretagare

Aim/objective

To create greater opportunities for new and smaller firms  to obtain small loans with limited collateral

Description of support

In January 2009, the Swedish government decided to increase the maximum amount of ALMI Business Partner’s (ALMI Företagspartner) microloans, from SEK 100,000 (€ 11,000)  to 250,000 (€27,800) with no requirements on cofinancing.

Target group

Small and new businesses. Micro loans are especially requested by women, immigrants and young people.

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since March 2008 – Present. The measure was initiated due to recession.

Title

Changed regulations concerning taxation rules for part-owners of closely held companiescompanies (the so-called Swedish 3:12 regulations)

Ändrade 3:12-regler

Aim/objective

To create better conditions for enterprises to hire and invest more

Description of support

The changes include a higher standard amount that regulates how much dividend that can be withdrawn from a closely held company by an owner. After the changes, the amount is higher which creates better conditions for enterprises.

Target group

Closely held companies

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 2008 – Present. Not initiated due to the recession.

Title

Sänkt bolagsskatt

Reduced corporation tax

Aim/objective

To make it more profitable to invest in Swedish companies and to create jobs

Description of support

A reduction of the corporation tax from 28% to 26.3%

Target group

Corporations

Initiator and other actors involved

The government and the Swedish Tax Agency (Skatteverket)

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 1 January 2009 – Present. Not initiated due to the recession.

Title

Ingen löneskatt för personer 65 år och äldre

No wage tax on labour for people age 65 and older

Aim/objective

To stimulate growth and make it easier for companies to hire

Description of support

People aged 65 and older have had a special wage tax on labour income or active business. From 1 January 2008, the special wage tax was abolished for all people over 65 years old.

Target group

People aged 65 and over

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 1 January2008 – Present.

Title

Företagshypotek

Changes in mortgage regulation

Aim/objective

To stimulate entrepreneurship and improve access to capitalfor small and medium-sized businesses.

Description of support

The Government implemented changes of the regulatory framework concerning mortgages. The new regulations make it possible for businesses to use movable property as collateral for loans.

Target group

SMEs

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 1 January 2009 – Present. Not initiated due to the recession.

Title

Sänkta egenavgifter för enskilda egenföretagare

Reduced self-employed contributions (to social security) for self-employed

Aim/objective

To increase self-employment and make it more profitable to start a business

Description of support

Self-employed and legal persons who are part owners in a general partnership can claim a deduction of five % of the self-employed contributions, to a maximum amount of SEK 10,000 (€1,100) per year.

Target group

Self-employed and legal persons who are part owners in a general partnership. The company has to have a net income exceeding SEK 40,000 (€4,440) and the business owner has to be over 26 but not older 65 years old, to be eligible for the deduction.

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since July 2010 – Present. Not initiated due to the recession

   

Title

Avskaffad revisionsplikt

Audit exemptions for very small companies

Aim/objective

To decrease micro enterprises administrative costs

Description of support

To qualify for total audit exemption, a company must meet less than two of the three following criteria:

- have no more than three employees

- its net turnover must not be more than SEK 3 million (€333,000)

- Its balance sheet total must not be more than SEK 1,5 million (€166,700)

These companies are, if they meet the criteria, free to choose if they are to have an auditor or not. 

Target group

Micro enterprises (The measure targets around 250,000 micro enterprises)

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 1November 2010 – Present. Not initiated due to the recession.

Title

ROT-avdraget

Tax deduction for renovations

Aim/objective

To boost the construction sector and create and maintain jobs

Description of support

Swedish citizens can apply for a tax deduction amounting to 50% of the labour cost, maximum SEK 50,000 (€5,550) a year for renovations , repair and maintenance work on homes

Target group

The construction sector

Initiator and other actors involved

The government

Duration (please also indicate whether the measures has been initiated due to the recession)

Since 1 July 2009 – Present. Not initiated due to the recession.


2.2. In-depth description of ‘Good Practices’

Please choose up to three examples from the above list that can be considered as ‘Good Practice’ (e.g. because of their effectiveness, innovative character or beneficial cooperation among different stakeholders) and describe them in detail.

Name of the programme/instrument

In national language and English

Förstärkt utlåning från ALMI till små- och medelstora företag.

Reinforced lending from ALMI to SMEs

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

implicitly

   

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

Due to the situation in the credit market after the financial crisis, the government wanted to improve and increase ALMI Business Partner’s (ALMI Företagspartner) lending to ensure the survival of existing Swedish companies.

Purpose and aims for the instrument (please describe)

To increase the opportunities for SMEs to obtain loans from ALMI at a time when financial turmoil made ​​it hard to get financing from banks

Initiator
Please ‘X’      
Other stakeholders actively involved in implementation (please name them and describe their roles)

ALMI Business Partner (ALMI Företagspartner) is a state owned company with the task to promote the development of competitive small and medium-sized businesses as well as to stimulate new enterprise with the aim of creating growth and innovation. ALMI is mainly occupied with risk financing and counselling. ALMI’s activity covers the whole process; from idea to a profitable business.

Target groups        
Please describe the target groups (sector, age, level of education, gender)

Business owners who, during and due to the financial crisis, had difficulties to obtain bank loans

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

The government contributed with SEK two billion (€222 million) to ALMI’s loan fund (national funds).

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

The demand for ALMI's loans rose sharply during the financial crisis because of the liquidity crisis in the banking system, which caused difficulties for enterprises to obtain bank loans. The reimbursement rates for existing borrowers also decreased, due to difficulties for the borrowers to refinance their bank loans. In the second half of 2008, ALMI’s new lending increased by 40% compared to the year before. But ALMIs loan activity was restricted by the size of their loan fund and the amount of equity and there was a risk that ALMI would not be able to meet the increased demand for credit. Therefore, the Swedish Parliament authorised the government to contribute additional SEK two billion (€222 million) to the loan fund. The decision came into force on 1 December 2008. ALMI's focus had previously been small businesses, but due to larger companies’ difficulties on the financial market, the Government extended ALMIs focus to companies up to 250 employees.

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

The government's action led to a sharp increase in demand for credit from ALMI in 2009. Until the third quarter of 2009, ALMI had granted loans of SEK 2.6 billion (€289 million), compared with SEK 1.3 billion (€144 million) during the corresponding period in 2008 – an increase of 101 %. Almost the entire increase – SEK 1.2 billion (€133 million) was in the business area established companies. In monetary terms the increase has mainly gone to companies with fewer than 50 employees. The new directives from the government, together with the increased demand from large companies, however, resulted that loans to the segment with 50-250 employees grew significantly compared to previous years.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

No challenges to reach the target has been reported, but when the credit market now has stabilised, it is a complex question how and if the government should lower the funding back to normal.

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

According to the Swedish National Debt Office (Riksgälden), ALMI has had a positive impact on the supply of credit to existing businesses. ALMI has, during the crisis, also become better known among potential borrowers and probably formed a stronger network among the banks. This could mean that the demand for ALMI’s financial services will increase from a longer-term perspective, especially in the segment 50-250 employees where ALMI hardly operated before the crisis. 

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

Instead of increasing start-ups, the government’s financial contribution to ALMI rather helped existing companies to survive the crisis.

Please provide link to evaluation documents if possible

Swedish Nation Debt Office (Riksgälden): Webdocument

Example 2:

Name of the programme/instrument

In national language and English

Sänkta egenavgifter för enskilda egenföretagare

Reduced self-employed contributions for self-employed

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

x

   

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

Reduced self-employed contributions will increase the individual business owner’s disposable income, which in turn can contribute to more people considering starting their own business

Purpose and aims for the instrument (please describe)

To increase self-employment and make it more profitable to start a business

Initiator
Please ‘X’      
Other stakeholders actively involved in implementation (please name them and describe their roles)

No other stakeholders

Target groups        
Please describe the target groups (sector, age, level of education, gender)

Self-employed or individuals who are part-owner in a general partnership. The company has to have a net income exceeding SEK 40,000 (€4,440) and the business owner has to be over 26 but not older 65 years old, to be eligible for the deduction.

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

SEK 1.2 billion (€133 million)

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

Self-employed or individuals who are part-owner in general partnership can claim a deduction of five % of the self-employed contributions (to social security) to a maximum amount of 10,000 (€1,110) SEK per year.

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

According to the Institute for Labour Market Policy (IFAU) and the Swedish Agency for Growth Policy Analysis (Tillväxtanalys), a reduction of the self-employed contributions can reduce the overall barrier of starting a business and therefore contribute to an increased influx of self-employment. The reduction lowers costs and enhances liquidity in existing businesses, which may contribute to greater survival among companies. Thus, there are two primary objectives of the measure that should be emphasised: increased start-ups of businesses and greater survival among existing business. However, IFAU argue that the reduction is relatively small, which may also contribute to a smaller effect.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

No challenges have been reported

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

IFAU argues that a reduction of the self-employed contributions makes self-employment more attractive, both in relation to other forms of employment and in relation to unemployment. The fiscal costs for reducing the self-employed contributions are also much lower than other previous measures that also have included the employer contributions.

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

As mentioned above, a reduction of the self-employed contributions may increase incentives to start a business, thus the number of start-ups.

Please provide link to evaluation documents if possible

The Institute for Labour Market Policy (IFAU): Webarticle

Swedish Agency for Growth Policy Analysis (Tillväxtanalys): Webarticle

Name of the programme/instrument

In national language and English

ROT-avdraget

Tax deduction for renovations

Is the instrument explicitly addressing any of the following:

Self-employment

Hiring the first employee

Hiring additional employees/creating additional jobs in micro enterprises

Please ‘X’ and/or describe if relevant

No

No

No

Operational level

Local

Regional

National

Please ‘X’ and/or describe if relevant

   

x

Rationale/motivation for the instrument

(please describe)

The idea behind the measure is to make it cheaper for citizens to buy services in the construction sector, which in itself can lead to more jobs in the sector.  This measure is also hoping to transform undeclared work, which previously has been a problem in the sector, to legal work.

Purpose and aims for the instrument (please describe)

Reduce undeclared work and increase the labour demand in the construction sector.

Initiator Social partners Public authorities Non-for-profit Others
Please ‘X’  

x

   
Other stakeholders actively involved in implementation (please name them and describe their roles)

The Swedish Tax Agency (Skatteverket)

Target groups        
Please describe the target groups (sector, age, level of education, gender)

Enterprises within the construction sector and citizens wanting to buy services in the sector

Funding        
Please describe the funding of the instrument/programme (national and European sources, budget available)

The government allocates SEK 3.6 billion (€400 million) per year from national funds

Activities    
Please describe the activities of the programme or institutional initiative as detailed as possible

Since 1 July 2009, Swedish citizens can apply for a tax deduction amounting to 50% of the labour cost, maximum SEK 50,000 (€5,550) a year for renovations, repair and maintenance work on homes. The tax deduction only covers labour work. Materials and travel expenses in connection with the construction work are not covered by the deduction. The tax deduction can be given to owners of a house, vacation house or condominium. The citizen pays half of the cost to the seller and the seller requests the outstanding sum from the Swedish Tax Agency (Skatteverket).

Results (Effectiveness)      
Please describe the results e.g. number of beneficiaries, advised enterprises

In July 2010, over 647,935 people had used the tax deduction according to the Swedish Tax Agency (Skatteverket). In the autumn of 2009, the Swedish Federation of Business Owners (Företagarna) conducted a survey among 1,857 companies in the construction sector. The result showed that nearly 80% of the surveyed companies felt that the measure had a positive impact on reducing illegal employment. 7% of the respondents indicated that they hired new staff, while 17 % said they have avoided reducing the workforce due to the measure. The increased willingness to employ, however, was highest among larger enterprises.

Challenges in order to reach the objectives e.g. for the organisation offering the instrument, the entrepreneurs (Please describe); and if available how these have been overcome

No challenges have been reported

Assessments of the effectiveness e.g. investments made in order to reach the objectives of the programme (outcome vs. investment) (Please base this assessment on evaluations when possible)

The government has projected that the deduction will cost SEK 3.5 billion  (€389 million)  per year and at the same time provide the state with tax revenues equal to the expenditures. The first year (1 July 2009 - June 30 2010) the Swedish Tax Agency (Skatteverket) paid out over SEK 9.4 billion (€1.04 billion) for 55,367 companies, which is more than expected. However, the government claims that the measure is still profitable because of the fact that the measure has created jobs and transformed undeclared work into legal work.

Outcomes (Efficiency)  
Increasing self-employment, growth and employment e.g. number of start-up and/or jobs created etc. (please describe, preferably based on evaluations, otherwise on experts’ assessment)

It is difficult to determine with certainty how much effect the tax reduction has had on employment in the construction industry. According to a report by the  Swedish Federation of Business Owners (Företagarna) the tax deduction created at least 10,000 new jobs in 2009. The result is supported by the Confederation of Swedish Enterprises (Svenskt Näringsliv)

Please provide link to evaluation documents if possible

Report from the Swedish Federation of Business Owners (Företagarna): webdocument

Article in the Swedish newspaper Dagens Industri (DI): Webarticle

The Swedish Government, facts about taxes: Website

The Swedish Tax Agency (Skatteverket) press release: Webdocument

Part 3: Annex: Update on recent self-employment study

The recent European Employment Observatory Review on self-employment 2010, European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities provides insight into support instruments for self-employment. To avoid duplication of this information, we ask you as National Correspondent to omit these measures already covered in your research (Part 2 of this questionnaire), and only update or add any additional details or measures that exceed the information already provided in this report.

Table 8: Additional information on specific instruments to the EEO national report on self-employment:

Title of the instrument

Temporary Act on deferment of tax payments for the year 2009

Additional information

The aim of the measure was to mitigate liquidity problems for businesses due to the financial crisis and was a part of the government’s anti-crisis package.

Table 9: Please add any other comments to the EEO national report on self-employment:

Table 10: Please indicate ‘X’ if you have no additional information to the EEO national report on self-employment:

Please indicate ‘X’ if you have no additional information to provide

 

Commentary

The new Swedish government, who took office in 2006 and was reelected in 2010, has pursued a work-line policy with the aim of mitigating exclusion from the labour market and increasing entrepreneurship and self-employment. The government has in recent years also deregulated some of the state-owned companies, such as the pharmacy sector, in order to foster entrepreneurship, innovation and growth. However, the policy focus is more directed towards SMEs and entrepreneurship in general than micro enterprises and self-employed explicitly. Many governmental measures concerning entrepreneurship are targeted at specific groups in society, such as immigrants, unemployed or women.

Sweden managed to recover from the financial crisis relatively fast compared to other European countries. No public measures leading to disincentives for self-employed or micro enterprises have been initiated a result of the financial crisis. However, many enterprises have suffered from capital shortage during the crisis. This problem was met by the government by contributing additional capital to the state owned company ALMI Business Partner’s (ALMI Företagspartner).

Jan Persson and Jenny Nordlöw, Oxford Research

Bibliography

• Almerud, M; Hjalmarsson, D; Lundberg, M and Lundström, A., Country Report - The case of Sweden, IPREG, 2007 Webdocument

• Dagens Industri, Rot-avdraget blir dyrare än beräknat, 2009-06-23, Webarticle

• Lundström, A (ed), Entrepreneurship policy in the Nordic countries – perspectives of the development since 2003, Nordic Innovation Centre, 2008 Webdocument

• Proposition 2009/10:148, Företagsutveckling - statliga insatser för finansiering och rådgivning, Regeringskansliet, 2010 Website

• Regeringskansliet, Växtkraft – 172 insatser och områden som främjar jobb och företagsamhet i hela landet, 2010, Wedcodument

• The Swedish Government, facts about taxes: Website

• The Swedish Institute for Growth Policy Analysis, Remissvar, Nedsättning av egenavgifter, 12 January 2010, Webdocument

• The Institute for Labour Market Policy, Remissvar, Promemorian Nedsättning av egenavgifter, 11 January 2010, Webdocument

• The Swedish Federation of Business Owners, Rut och ROT ger job, 2010, webdocument

• The Swedish Tax Agency, press release, Närmare 67 000 företag har utfört ROT- och hushållsarbeten, 2010, Webdocument

Interviews

• Small Enterprises Association, (Småföretagarnas Riksförbund), contacted on 10 March 2011

• Swedish Federation of Business Owners ( Företagarna), contacted on 10 March 2011



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