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NFTC Urges Sweden to Refrain from Adopting New Tax Proposal with ‘Dramatic’ Interest Deductibility Restrictions
Date: 7/21/2008
Written By: Eric Thomas or Jennifer Cummings, The Fratelli Group for NFTC, 202-822-9491

Washington, DC ¬– National Foreign Trade Council (NFTC) President Bill Reinsch today sent letters to Swedish Minister of Finance Anders Borg and State Secretary Ingemar Hansson, urging the ministry to refrain from adopting tax policies, which would place greater restrictions on the deductibility of interest. The NFTC sent the letters in response to a recent report developed by Sweden’s Tax Administration.

“Sweden has, in part, been a favored destination for inward investment both because of its stable tax regime, and because of a consistent effort by Swedish lawmakers to provide an attractive investment environment. However, the Ministry of Finance has now released a report from the Tax Administration which proposes dramatic restrictions on the deductibility of interest in certain related party settings,” wrote Reinsch. “Were this proposal to be enacted in its current form, it could have a very serious effect on inward investment into Sweden.”

Reinsch continued, “We would, at the very least, encourage you to postpone the effectiveness of any provisions until 2010, and extend the comment period to allow proper consultation on, and consideration of, these proposals.” Further, while Reinsch acknowledged that Sweden is entitled to protect its tax base through a potential law change, he argued, “any such rules should take into account international norms, as well as legitimate business practices. The proposed rules, as currently drafted, would not do this.”

The NFTC outlined its objection to the proposed rules, including that they would put companies doing business in Sweden at an unfair disadvantage, as they are much stricter than any other similar rules. The proposed rules also ignore “several important areas of normal and legitimate business,” including post-acquisition restructurings, and the loan tracking provisions could potentially be “exceptionally burdensome.”

 “We would urge you not to jeopardize your hard-won reputation as a stable, welcoming environment for multinational business and investment. You could do this by a hasty adoption of an interest restriction regime which would hit legitimate business transactions, and greatly add to the cost of doing business in Sweden,” Reinsch concluded.

For a full copy of the letter, please click here.