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Why Sweden’s VAT tax breaks on repairs could be a big deal

The Swedish government is set to take policy steps to enable a different kind of behaviour in the way in which products are used and the life-cycles of goods. Tax breaks on repairs to bicycles, washing machines and just about any broken item are being brought to the parliament by the ruling coalition. Realities on the ground are not always closely linked to the intentions behind policies, but in the current business context, it’ll be interesting to see whether Sweden’s move provides some kind of model for other countries.

Photo via Visual hunt
Photo via Visual hunt

A VAT rate slash from 25% to 12% on repairs to a range of products, including bikes, shoes and white goods, has been put forward and a further piece of policy is expected where people will be allowed to claim back a portion income tax on the labour cost of repairing appliances.

“We believe that this could substantially lower the cost and so make it more rational economic behaviour to repair your goods,” said Per Bolund, Sweden’s minister for financial markets and consumer affairs told the Guardian.

These legislative initiatives are designed to foster a marketplace where it makes less sense for consumers to throw out broken items and to incentivise the repairs industry in Sweden.

While they are part of Sweden’s focus on reducing carbon emissions, what makes these policies most interesting is their potential link and indirect enablement of disruptive business trends like the sharing economy and maker movements.

Photo via VisualHunt.com
Photo via VisualHunt.com

There is already an emerging business case for higher levels of repair and sharing models, and a policy framework that systematically provides both labour and purchasing advantages for those behaviours could help those marketplaces become more entrenched and widely spread.

The tax breaks are part of the Swedish government’s budget proposal. If they are voted through in December, they could become law as early as 1 January 2017.

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The Author

Seb Egerton-Read

Seb Egerton-Read

Seb writes daily content for Circulate across the full spectrum of the website's topics. Previously he has spent five years as a freelance writer for a number of websites and blogs. You can e-mail Seb at seb[at]circulatenews.org

1 Comment

  1. September 26, 2016 at 2:06 pm — Reply

    Just curious what the typical wage is for a Swedish repair person – and how that compares with the cost of the object being repaired? Expensive items like cars get repaired for sure – but even broken TVs and computers, that cost several hundred or even thousands of euros, often take hours to repair. The only way I would see this making sense is through a warranty policy, but that is no different than what we have in place today. For a true circular economy to take hold, where everything is repurposed at end of life, a dramatic shift in labor wage rates will be needed

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