Creating Tax-Compliant Citizens in Sweden : The role of Social Democracy

As discussed by Nistotskaya and D'Arcy in Chapter 2 on Sweden, a long tradition of generally high-quality institutions has paved the way for excellent state capacity. This chapter focuses on the twentieth century, a time when Sweden developed into a high-tax-rate country with extraordinary tax compliance—a unique combination. Sweden underwent a profound transformation in the middle of the twentieth century: The Social Democratic Party (Socialdemokratiska arbetarpartiet, or SAP) won the 1932 election and stayed in office for forty-four consecutive years. High union density and corporatism introduced in the postwar period gave extensive powers to the union movement and to employers' organizations. The “golden age” of social democracy—the 1950s and 1960s—was characterized by full employment, an expanding welfare state system that included benefits such as comprehensive all-inclusive social insurance schemes, and diminishing wage inequality. It was in this context that Sweden transformed from a country with low tax rates to a country with high tax rates. Swedes are today among the most heavily taxed people in the world. Interestingly, Sweden also has the highest level of tax compliance, an unexpected combination. How was such a transition possible? This chapter focuses on the sense-making of the tax system. More specifically, I examine how the SAP tried to create and reproduce tax morale while upholding the state's capacity to collect taxes. In democracies, governments need the electorate's support for their policies, regardless of the capacity of the state; of course, how citizens perceive politics is also important for winning elections. The political elite can play a crucial role by making sense of policies