Economy

How responsible increase in taxes help Scandinavian countries

Are taxes bad? They surely put a direct pressure on an individual but one cannot deny that they help a lot to the betterment of the state if imposed in a right way. That being said, increasing tax is not the best way to achieve good economy and things should be carefully evaluated before making any such decisions. However, it is interesting to see that how Scandinavian nations, especially Sweden has performed in an efficient manner with increase in taxes.

Sweden has an interesting economic history and cannot deny the fact that their GDP grew consistently from 1933 to 1975 and one of the main reasons for this is said to be a responsible increase in indirect taxes. In the article, it has been argued that the indirect taxes on low production encouraged businesses to produce more is I think a little overstretched. So much importance has been given to the taxes but they’re not related to the production of goods, in the case of Sweden. It remained a country that achieved an optimum level of employment during its golden period and constant rise in demand for goods because of consistent profits and revenue is a big factor in determining the growth of the GDP.

Indirect taxes and their impact

Indirect taxes and only harmed small and medium scale enterprises as they had to invest a lot in their R&D area to ensure they are competing equally well with the big fishes. This added an unnecessary burden on the shoulder of the labor. RM model differentiates the economic policy of Sweden into two major aspects – social and economic but when you think about it, it was majorly political. Till now, Scandinavian countries become quite successful by combining higher taxes with full employment and they achieve their desired results but this model works because of a higher rate of production. The fear of paying taxes on low production has instigated many and this played a vital role in establishing Sweden’s economy.

Why the model is not successful all over the world

The model is not successful in other parts of the world because of different factors like high population, fragile political condition, infertile land and capital, lack of industrial civilization, and so on. Sweden on the other hand always had quite a handful of industries because of their transformation from an agrarian society to an industrial one and a low population has played a key role in them achieving the full level of employment. All these were, I think, behind their increased GDP and not the increased taxation.

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