Similarities and Differences in Sweden and the United Kingdoms Regulatory Economic Structure - Essay Example

23 November 2006 United Kingdom and Sweden: Economic and Regulatory Environment The Kingdom of Sweden is the fifth largest country in Europe, according to land area. It is known for having an even distribution of income among its inhabitants. In fact, Sweden is one of the most evenly income distributed countries in the world. ("Sweden."). The average per capita income in Sweden is currently at 20,828 or 280,746 Swedish Kroner (SEK). The United Kingdom is a member of the G8, with the fifth largest economy in the world. It ranks third in population among the European Union states. (EU). What are some similarities and differences in Sweden and the United Kingdoms' regulatory economic structure How does Sweden maintain its economic structure, yet still manages to maintain positive cultural development Sweden and the United Kingdom are both members of the European Union (EU). Twelve of these nations are tied together with the common currency, the Euro, and the EU's remaining members are obligated to join by treaty once they meet specific criteria. Sweden and the UK have made no plans as of yet to change to the Euro. The EU is the world's largest economy, which is projected to grow at a rate of 2.1% per year. The Growth and Stability Pact insures that each state's deficit doesn't exceed 3% of the Gross Domestic Product (GDP), and its public debt must remain below 60% of their GDP. Sweden and the United Kingdom both possess very strong regulatory frameworks. For example, Stephen Minger, who is the stem cell biology laboratory director at King's College in London, stated that: The United Kingdom is one of the best places in the world to do stem cell research. This is because of the strong history in stem cell biology in the UK, the tight regulatory system administered by the Human Fertilisation and Embryology Authority (HFEA) and the strong commitment we have, both financially and politically, from the government." (Rehwagen). Simon Best, chairman elect of the United Kingdom Bio Industry Association, also said that, "Australia, the U.K., some U.S. states, and Sweden are world class in this field. The U.K. is in a good position to build on the talents." (Rehwagen). Currently, Sweden is in a phase of economic growth. Their main policy is to "increase prosperity by means of strong, sustained growth and full employment." ("Sweden's Action Plan). Sweden has a population estimated in 2006 at 9,103,551, with a highly skilled workforce. The World Economic Forum (WEF) ranked Sweden as third in their survey of 104 economies and their capacity for future growth. ("Economy of the European Union"). Business growth in Sweden is deemed successful due to many factors such as: a very healthy macro-economic environment, easy access to advanced technologies, qualified workforce, good infrastructure, and competitive costs for staff, rent, and business expenses. The unemployment rate of Sweden is highly contested among political officials but the official figure is currently at 5.4% (2006.) ("Sweden."). Many Swedes also choose to work abroad in neighboring countries such as Denmark, Norway, and the United Kingdom. In relation to this, Sweden has had one of the highest tax quotas in the world since the 1960's. Countries such as France, Belgium, and Denmark have very similar taxation rates. Sweden's taxation plan is known as a two-step progressive plan. The average municipal income tax is around 31% to 56% and a capital tax rate of a flat 30%. Single persons with a net wealth more than 1,500,000 Swedish Kroner (SEK) (equivalent to 111,280) are taxed a flat rate of 1.5%. ("Economy of the European Union."). Employers are obligated to pay a 32% tax which is called an "employers fee." Other taxes in Sweden include the national Value Added Tax (VAT) of 18% or 25%, food carries a 12% VAT, and transportation and books are taxed at 6%. Miscellaneous items such as petroleum and alcohol are taxed at higher rates. Due to the high tax rates, Swedes are eligible for many government funded benefits such as: tax-funded childcare, maternity/parental leave, government regulated health care costs, education including university, retirement pensions, dental care, and sick leave. Parents of children up to the age of eight are eligible for one full year of paid leave from work, and fathers are eligible for one month of this also. ("Sweden."). Sweden is a constitutional monarchy and its taxation is controlled by the Riksdag (Parliament). The Swedish Social Democratic Party has been a major influence in the Parliament since 1917. The Swedish government spends over fifty-percent of their GDP. The GDP for Sweden in 2004 was 181,784 billion, whereas the U.K.'s GDP is at 1,123,483 billion, the U.K. spends only twenty-five percent of their GDP. This is the main reason why Sweden is such a large welfare state requiring high income tax rates. Yet, budget surpluses have averaged at 3% of GDP during the years 2000 thru 2002. As a result, Sweden's deficit (-1.4% of GDP) is considerably lower than the UK (-3.2% of GDP.) ("Economy of the European Union"). Twice a year, the Swedish Government presents to the state its budget policies and procedures to the Riksdag. Work on the budget usually begins more than a year before the fiscal year concerned. For example, work on for the 2007 budget will begin at the end of 2005. The Ministry of Finance begins the year by examining, reviewing, and updating economic forecasts that are prepared for future years. These forecasts are merely predictions or assessments for present or future developments for the country. They must take into consideration any changes in the following: economic growth, unemployment, price changes, and interest and exchange rates. ("January."). After doing this, they will fully analyze and submit any budget reforms that will entail an increase and to accomplish this they will have to cut expenditures in other areas of the budget. In March, the Government gathers to discuss the economic and budget policies, objectives and priorities, and the main points included in the Spring Fiscal Policy Bill, The Spring Fiscal Policy bill will be presented to the Riksdag in April. At the end of March, the Riksrevisionen, which is the Swedish national audit office, prepares audit reports and accounts based on annual reports that were submitted earlier that year by the Ministry of Finance. ("March."). The Riksrevisionen's job is to ensure that the accounts prepared by government and public authorities are reliable and correct. Citizens in the UK are allowed to question and give complaints to their respective auditors. The accounts are audited by independent and private auditors who are chosen by the Audit Commision in England and Wales,the Accounts Commission for Scotland, and the head local government auditor for Northern Ireland. Sweden submits The Spring Fiscal Policy Bill in April, along with a report that includes the central governments previous years income and expenditures. The Spring Fiscal Policy Bill contains a supplementary budget which includes proposal changes in the governments' budget for the current year. ("April."). Sweden's annual Budget Bill, which was drafted in May, will be introduced on or before the 20th September. The government must also submit details on its areas of activity. A formal decision on The Spring Fiscal Policy Bill will be reached at the beginning of June. The Budget Bills contains information regarding the budget allotted to twenty-seven different government sectors. Within these sectors are five hundred different appropriation committees. ("September."). The budget bill is considered complete and the government is not allowed to propose any bills that will raise or lower the budget. In October, the opposition's party is permitted to propose any other options for the budget bill. The government makes any necessary decisions on taxes and other sources of government revenues in November, after they have set the budget at a specific limit. The Parliamentary Committee on Finance introduces the economic parameters. The Riksdag and Committee on Finance debate in the Chamber on 20th November. The Riksdag makes a final decision on the final budget ceiling, the disbursement of the government revenue, changes in taxes/charges, and the final estimate of the governments' revenues. ("November."). The United Kingdom, unlike Sweden, maintains the principle of low taxation and regulations. The HM treasury oversees the UK's financial and economical policies. Their main purposes are to: become economically stable, lower inflation, offer efficient public services, manage public finances, and become an even more productive economy. ("HM Treasury."). HM Revenue and Customs (formerly known as Inland Revenue and HM Customs and Excise) is in charge of collecting income taxes, value added tax, and custom duties. Income taxes is the largest source of U.K. government revenue and they range anywhere from ten to forty percent, dependent upon a taxpayers gross yearly income and age. All citizens in the U.K. below the age of sixty-five are allowed an income tax allowance of 5,035. This amount is free from government taxation. Their second and third largest source of government revenue is through National insurance contributions and the value added tax (VAT). National insurance contributions are essentially a type of government retirement fund that employees, employers, and the self employed pay into. The amount paid per week in the 2005-2006 tax year ranged from 82 and 630. ("United Kingdom."). The VAT is charged on goods and services at the flat rate of 17.5%. A few specific goods and services are charged a lower VAT at 5%. Nevertheless, the U.K. remains the fifth largest economy based on market exchange rates. ("United Kingdom."). Tourism and financial services are the most important to the British economy. Increased government spending in taxes of 29 billion in 2006 has lead to many improvements on infrastructure. Sweden culture is known for its egalitarianism, yet it is open to international influences. The overall attitude of those living in Sweden is highly influenced by what is known as Jante Law. It is made up of ten rules with the main rule, "Don't think you're anyone special or that you're better than us." ("Jante Law."). This rule definitely plays a key role in Sweden's economic and regulatory environment. For example, blatant displays of wealth or public scandals are highly criticized. They prefer to express life in very humble, honest, and modest ways. Sweden is known for its individualist attitudes and values so many are seen as very tolerant of things such as homosexuality. As a result of these ideals, Sweden has very little corruption and encourages hard work. In conclusion, Sweden and the UK have many factors which make them very similar in regards to their economic future prosperity. Their cultures help influence their economic policies. For example, Sweden's egalitarianism ideals help to influence the equality of their earned incomes. Sweden and the UK definitely are two countries that strive to together collectively for a common good, which appears to be quite successful. Works Cited "April." 1 July 2005. Ministry of Finance. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/2855/a/18849;jsessionid=aveKo2b1XTkf. "Culture of Sweden." 17 November 2006. Wikipedia: The Free Encyclopedia. www.en.wikipedia.org. 27 November 2006. http://en.wikipedia.org/wiki/Culture_of_Sweden. "Economy of the European Union." 20 November 2006. Wikipedia: The Free Encyclopedia. www.en.wikipedia.org. 27 November 2006. http://en.wikipedia.org/wiki/Economy_of_the_European_Union "Global Development and Development Cooperation." 5 October 2006. Ministry for Foreign Affairs. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/3102. "HM Treasury." 10 Downing Street. www.number-10.gov.uk. 27 November 2006. http://www.number-10.gov.uk/output/Page1485.asp. "Jante Law." 5 November 2006. Wikipedia: The Free Encyclopedia. www.en.wikipedia.org. 27 November 2006. http://en.wikipedia.org/wiki/Jante_Law. "January." 1 July 2005. Ministry of Finance. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/2855/a/18839;jsessionid=aAMTk9iRqGZ_ "March." 1 July 2005. Ministry of Finance. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/2855/a/18848;jsessionid=a39GwK7F1Tf6. "November." 23 April 2004. Ministry of Finance. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/2855/a/18866;jsessionid=auOxqnD-OL87. Rehwagen, Christine. "UK's Regulatory Framework Gives it an Advantage in Stem Cell Research." 26 November 2006. BMJ Publishing Group Ltd. www.bmj.com. 27 November 2006. http://www.bmj.com/cgi/content/full/331/7527/1228-betoc. "September." 1 July 2005. Ministry of Finance. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/sb/d/2855/a/18862;jsessionid=aSHzv79mYmg7. "Sweden." 22 November 2006. Wikipedia: The Free Encyclopedia. www.enwikipedia.org. 27 November 2006. http://en.wikipedia.org/wiki/Sweden. "Sweden's Action Plan for Employment 2003." October 2003. Ministry of Finance and Ministry of Industry, Employment, and Communication. www.sweden.gov. 27 November 2006. http://www.sweden.gov.se/content/1/c6/01/52/21/1ce3afbe.pdf. "United Kingdom." 21 November 2006. Wikipedia: The Free Encyclopedia. www.en.wikipedia.org. 27 November 2006. http://en.wikipedia.org/wiki/United_Kingdom. Read More