OVERVIEW OF FISCAL DECENTRALISATION

Sweden's government structure is highly decentralised and includes two sub-national levels: 21 counties and 290 municipalities. In reality, the number of government levels should be seen as only two as there is no hierarchical relationship between counties and municipalities since both have their own self-governing local authorities dealing with different responsibilities.

Legal acts governing fiscal decentralisation

The Swedish Constitution gives explicit recognition to the principle of local self-government. The Local Government Act (2004) delineates the framework of local autonomies, assigns specific competences and lists the revenue sources for local entities. The revenues of sub-national governments are derived from tax revenues (about two-thirds of the total), general transfers from the central government (roughly 15% for municipalities and 9% for counties), targeted government transfer (3-4%), and user fees and rents (about 6% for municipalities and 3% for counties). Local governments are entitled to levy taxes on citizens' income to meet their financial obligations and are free to decide on their own tax levels; at the aggregate level, the municipality tax rate is around 20%, while the county rate is around 10%. Technically, taxes are collected by the central government and then redistributed on the basis of each tax.

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

Overall, 50% of Swedish public expenditures are dispensed by the central government and 50% by municipalities and counties (see the pie chart).

Fiscal equalisation mechanisms

A fiscal equalisation system is managed by the central government. In order to cope with the high variation of citizens' taxable income and different costs of service provision across different municipalities/counties, a redistribution of resources across different sub-national governments is performed on the basis of the different tax bases and the levels of expenditures.

LEVEL OF FISCAL DECENTRALISATION

Revenue autonomy (own revenues relative to total resources available) at the local level (regions and municipalities) is higher than the EU average (67% versus 53% in 2018), this entails a dependency on central government transfers that is lower than the EU average (32% versus 47% in 2018). Local own revenues represented 33% of total government revenues in 2017, a value that was higher than the EU average (13%).

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

The composite ratio, which captures aspects of fiscal decentralisation of both revenue and expenditure, suggests the sub-national governments in Sweden have a degree of fiscal decentralisation (66% in 2017) that is substantially above the EU average (17% in 2017). The indicator measuring the level of tax autonomy also points towards a high level of fiscal autonomy for local governments in Sweden, with 98% of total local tax revenues under full control of local authorities.    

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

Fiscal rules and borrowing capacity

The autonomy of local governments in drafting their budgets is limited by the obligation to approve a balanced budget. In order to meet this requirement, local budgets are usually drafted following a conservative approach aiming for a 2-3% surplus.

Deficit and debt at sub-national levels

In 2018, the consolidated gross debt of the Swedish local government sector amounted to 11.4% of GDP, having increased by one percentage point during the last four years.

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

EXPENDITURE BY GOVERNMENT LEVEL AND BY POLICY AREA 

Expenditures of counties and municipalities represent a significant part of total general government expenditures in the fields of health (almost the totality, 97% in 2017), housing and community amenities (91% in 2017), education (80% in 2017), recreation, culture and religion (79% in 2017) and environmental protection (51% in 2017). 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

Counties and municipalities' spending is most concentrated, and more so than the EU average, in the fields of health (27 % of total local spending), social protection (27%) and education (22%). Other relevant areas of spending are general public services (11%) and economic affairs (6%).  

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.