Swedish government tax break programme for repair | Knowledge Hub | Circle Economy Foundation
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Policy case
Swedish government tax break programme for repair
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The Swedish government has introduced tax breaks on repairs for consumer goods, with the aim of inspiring people to fix their broken items rather than throwing them out. The government, composed of a Social Democrat and Green party coalition, submitted proposals to parliament in 2016 to cut the VAT rate on repairs from 25% to 12%. It will also submit a proposal that would allow people to get income tax deductions for repairs of larger household appliances. Through these measures, the government hopes to tackle emissions linked to consumption, buy both inspiring consumers to repair their goods and make it more financially attractive.

Problem

It is common for people to throw away an item or appliance when it breaks, rather than invest in the cost of repair—which can be hefty when accounting for VAT. The result? Tonnes and tonnes of fixable products and materials going to waste, and emissions rising in tandem with the increased consumption of new goods. While Sweden has slashed it's emissions by nearly a quarter since 1990, emissions related to consumption continue to rise.

Solution

To combat this issue, the Swedish government has issued a 50% tax break, reducing the VAT on repairs from 25% to 12%. Consumers can enjoy this benefit to repair anything, from clothing to bicycles to washing machines. For big-ticket items, like refrigerators ovens or dishwashers, consumers can also claim half the labour cost of the repair back on their income tax. 

Outcome

Per Bolund, the Swedish minister for financial markets and consumer affairs, thinks that this small tax cut will be enough to spark the success of the repair industry in Sweden. It is also hoped that this industry stimulation will result in an abundance of new jobs for those that lack formal education. With this measure, the Swedish government also hopes to reduce carbon emissions for goods produced outside of the country’s borders, rather than those produced domestically.

Additional information

Photo by Kilian Seiler on Unsplash

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