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You are here: Home i In Focus i In focus 2015 i Shadow economies - the Nordic strategies i Fewer Swedes want to buy or perform undeclared work

Fewer Swedes want to buy or perform undeclared work

Today nearly three times as many Swedes are negative towards undeclared work compared to six years ago. One explanation to this change in attitudes are the household tax breaks introduced in 2007 and 2008. Now the government is reducing the size of the deduction and critics warn against an increase in undeclared labour.
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In 2007 Sweden’s centre-right coalition introduced a tax break for household services, the so-called RUT deduction (a Swedish acronym for cleaning, maintenance and washing). ROT is short for renovation, refurbishment and extension and was introduced in 2008. RUT and ROT are jointly known as the household deduction. 

The tax deduction has been 50 percent for services, capped at 50,000 Swedish kronor (€5,350) per taxpayer per year. The number of people making use of the tax break has increased year on year, and in 2014 the Swedish Tax Agency registered 4.5 million purchases with household deductions.  

The centre-left government now wants to halve the ceiling for RUT services and introduce some limits on the types of services covered. The 50,000 kronor ceiling for ROT services will remain, but the tax deduction rate will be cut from 50 to 30 percent. The changes are expected to lead to an added tax revenue of 5.78 billion kronor (€62bn).

Katarina Nordblom

More people are paying for declared labour, but there’s also been a change to norms, says Katarina Nordblom, Associate Professor at the Department of Economics at the University of Gothenburg. “It has an effect on those who aren’t paying for services too."

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