Tax deductible donations: help me change the swedish system

[Guest]

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[Johan]

I have given this much thought. And have read many of the previous comments concerning taxes, tax deductions and accounting in the U.SofA.
I learn a little bit every day

Sweden have got completely different systems regarding politicians, taxes and donations.
I want to know in what way I can try to change and influence our government make the climate for donations a bit better?
I know that we have never had such a system, and I do not know if anyone ever have tried to change it in this way.
We pay between 30 and 37% of our total income in tax. If we give a donation it is not reducing our taxes at all. And if we have two occupations, on the second income we have to pay up to 60%  in tax...   

All ideas and suggestions are welcome!
I do not have a large lobby-organization with any influence or money to try and bribe the King and Prime Minister.

I also want to know in what countries that there are such legislation, that have tax incentives and makes it beneficial to be a donator to great causes in the world.
Perhaps a list in kivapedia ? with those countries that have good taxation and accounting system that allows people to ease their taxes slightly by being good citizens



take care / J

[Peter S]

Hi Johan,

The system for tax relief on charitable donations in the UK is similar to that in the USA.  For a donation which effectively costs me $100 net after tax relief, the charity ends up with $166, because my marginal tax rate is 40%.

Here's a link to an informative comparison of policies across various European countries.  It's in Powerpoint format, so you'll need MS Office to be able to read it.  I was shocked to see confirmation there that Sweden offers zero tax incentives to individuals for charitable giving:
www.partnerstva.sk/buxus/docs/MSS_Presentation_Bullain_Tax_Incentives_in_EU.ppt

As to what you can do to sway Swedish policy - I guess the simplistic answer is whatever you can do as a citizen to lobby and engage politically with others who share the same views.

P

[Johan]

Cheers, Mate! I will take a look at your link the next time I'm on one of those Win-doze-pjuters ( no micro-soft-soft-ware allowed on my little old green Apple from 1999 )

[Soriak]

Switzerland's system works pretty much the same as the US System: You deduct charitable donations from your taxable income. So if you earned $100,000 and donated $1,000 to a charity, you'd only pay income tax on $99,000.

That being said, you can only deduct it here if the charity is based in Switzerland. (it doesn't have to execute its mission here, just needs a domain) The cantons (states) keep a list of all "approved" organizations. They include more than just charities, all organizations that work "towards the common good and welfare" (something of that sort) - libraries, sports clubs, political parties and things like that. I'm not sure if there's a cap on anything but political parties - you can deduct at most $10,000 for politics, but (unlike the US) are free to donate as much as you want.

[charity]

I don't know anything about the taxing system in other countries, but just to clarify about the American system:  Here we have two methods of doing taxes when it comes to deductions.  As a taxpayer, you can choose which method is the best for you:  in the first method (which you guys seem to be talking about), you can deduct many expenses or donations from your income before you apply the tax rate formula.  Such expenses include things like interest payments on your home mortgage, medical expenses above 7.5% of your gross income, donations to nonprofit charitable organizations, and certain 'business' expenses.   If they own a home this is usually how people choose to do their taxes.
   
However, a large portion of people, myself included, do taxes the other way: This is a simpler method because you don't have to itemize and have receipts for everything.  But it also works out to be a better deal financially if you don't own a home or have huge medical or  business expenses or give away a ton in donations.  In this method, you don't get any credit specifically for donations or expenses, they just give you a "Standard deduction", which this year is $5350 for single people.   They also have something called exemptions which everyone gets.  For a single person that is $3400.  So if you make $60,000, you would be taxed on $60,000 - $3,400 -$5,350 = $51,250.  The federal tax on that amount is $9,243.  We also pay state income taxes, which vary by state, on top of the federal income tax.  For a single person making $60,000 in California, that state income tax is $2,966.  So in straight income taxes from the federal and state governments that would work out to 20.3% of gross income (although this really is a sliding scale, and varies depending on how much income you have and how many kids you have – in general, more affluent single people with no kids pay the most – but there are a lot of loop holes for rich business owners to get out of paying taxes by being able to deduct many expenses).  Unless it is worthwhile for you to itemize your deductions, you do not get a credit specifically for making donations;  for me, I would pretty much have to give away more than the $5,350 per year to make itemizing my deductions, and therefore getting a credit for my donations, worthwhile. 

We also have to pay 6.2% off the original gross income for the Social Security and Disability Program and 1.45% for the Medicare program (programs for elderly and disabled people in our country).   So really for the $60,000 income that is a 27.95% ( = 20.3% + 6.2% + 1.45%) income tax.  We also pay taxes on most purchases other than food from a grocery store.  Where I live the sales tax is 7.5% of purchases, and lodging taxes (if you stay in a hotel) is usually 10-14%.   People who own homes also pay annual property taxes.  We also pay for our own healthcare and get additional taxes on things like our utility and phone bills, and pay fairly large fees for government processing or copying of forms, such as for a drivers license.  I have never done it myself, but I have heard some people here in America say they have calculated how much money they spend on taxes and government fees, and they say they spend 50-65% of their gross income on it.  I don't know if they were counting medical expenses in that, but I doubt it. 

I don't know why I went into so much detail here.  I guess partly just to clarify that everyone in America doesn't specifically get a credit for donations, and also just to explain the system a bit.  I have commonly wondered about the taxation system in other countries.  I wish our country had universal healthcare, and would be willing to pay increased taxes for it (although I wish they would just take it out of the military funding!  ) I have heard that many European countries have much higher income taxes than here in America, but I also wondered if they have all the other levels of taxes we have as well.

[Johan]

We also pay taxes on most purchases other than food from a grocery store.  Where I live the sales tax is 7.5% of purchases, and lodging taxes (if you stay in a hotel) is usually 10-14%.   People who own homes also pay annual property taxes.  We also pay for our own healthcare and get additional taxes on things like our utility and phone bills, and pay fairly large fees for government processing or copying of forms, such as for a drivers license.  I have never done it myself, but I have heard some people here in America say they have calculated how much money they spend on taxes and government fees, and they say they spend 50-65% of their gross income on it.  I don't know if they were counting medical expenses in that, but I doubt it.

Thanks for being extremely detailed!
Now I know plenty more about your system/s.
Of course we have also sales-tax on all of our purchases. it is called MOMS.
different percentage scales for different items, (Im not sure about the exact figures, because it is always included in the price tags in shops), 6% on books, magazines and culture, 12% on food, 25% on all other stuff.
Plus there are additional taxes on cigarettes, vehicles, gasoline and alcohol, on top of the 25%.
and there's also 30% tax on bank interest rates and if you make a profit on stocks. (perhaps on all sorts of capital gains? im not sure)
Some people say they have calculated how much tax they pay, up to 90%!
Many people claim that it is not worth to work here because of the extreme tax pressure. We, a relatively rich western country, have a pretty large work force emigration, mainly to Norway and Great Britain.
But however, all of the healthcare and education systems are included in our taxes, so if we need to go to the hospital we only pay a small symbolic fee, the same with families that have kids in school. All families gets a monthly check that is supposed to pay some of the extra expenses in food and clothes. more money the more kids you have. Up to when kids are 19 or when they finish school or university (that is also free, so we now have many rich chinese kids moving here to get free educations in technology and medicine and so on.. )

And thanks to the new right wing government, the property taxes on homes are being eliminated or fased out. And if you sell your house it used to be a 30% property gains tax, but i think that is also being eliminated.
(We have had socialistic labour government for almost 100 years straight in a row, with a couple exceptions)
http://en.wikipedia.org/wiki/Swedish_Social_Democratic_Party

I guess these new blue guys in suits, will try to shape our whole tax system into more european standards, because many believe we are going towards "The United States of Europe", with all the current changes and proposals that are on the way in the EU.
I hope we will not have to endure all of the wars and troubles that you went through.

[QueenOfHearts]

Thank you charity for that indepth discussion of our tax system....I work for an accountant and although I am only a bookkeeper, your facts are great!! It just hurts my head knowing we are heading into tax season!!!

Queen

[Tomcat]

Yes, we also have lots of other taxes in the US in addition to income taxes. Like you, we have sales taxes and special taxes on gasoline and other special types of goods.

In the US, we have defined a day that we call Tax Freedom Day, which fell on April 30 in 2007. Before that day in the year, everything that the average American earned went to pay government taxes of some sort.  Unfortunately, Tax Freedom Day keeps getting later every year, meaning that a larger and larger percentage of our earnings are going for taxes.

[melhe]

I think we have had this opportunity in Sweden since 2012-01. But there are restrictions which makes Kiva-loans not tax-deductible for now.

The receiver of the donation must be on a list at Skatteverket (IRS in US?) and must pay 10000SEK (~$1500) once and 7000SEK/year to be on that list. The donation must also be at least 200SEK (two Kiva-loans).