Fixed This for You
Ernie Neve, CPA
March 8, 2017
For generations, Americans fostered a culture of thrifty self-reliance, especially where it comes to taking care of our stuff. It started all the way back in pioneer days, and living on the frontier's edge. Back when Pa Ingalls lived in that little house in the big woods, if his saw broke, he couldn't just order up a replacement on Amazon. He had to fix it, or he would have a tough time heating his house for the winter! Ma had one nice dress, for Sunday church, and when she got home she spent the rest of the day taking care of it. Folks mended and darned and repaired until household items had more lives than the family cat.
More recently, though, we've become a throwaway society. Maybe it's the flood of cheap, shoddy stuff from Walmart and China. Even formerly big-ticket purchases like TVs are cheap enough now that it rarely makes sense to repair them. (Think about it — your family room TV may have cost less than your phone.) Even real estate has become disposable, as thousands of Americans buy perfectly serviceable houses for the land they sit on, then tear them down to replace them with something bigger (and usually gaudier and not as well built).
Our democratic socialist friends in the Kingdom of Sweden have noticed the same trend, and they're not very happy about it. (Yes, Sweden is still a monarchy — King Carl XVI Gustaf hands out the Nobel Prizes every year, and collects Porsche 911s.) It might seem ironic for the country that unleashed IKEA's particleboard aesthetic on the world to champion durability. But they've expressed it through their tax code, of all things, by passing a new law cutting taxes on fixing things.
Here's the scoop. Like most European countries, Sweden imposes a value-added tax, which is a form of sales tax levied at each level of production (such as from producer to distributor to retailer). In Sweden, the tax is 25% for most goods and services, 12% for restaurant meals and hotel stays, and 6% for printed materials, cultural events, and travel within the country. For 2014, the VAT raised 353 billion krona ($39 billion dollars, give or take a couple of meatballs), which amounts to 21% of the country's revenue.
Last November, the legislature chopped the VAT tax on repairs to items like bicycles, shoes, and clothing, from 25% to 12%. The goal is to encourage Swedes to buy higher-quality products. They also "Sweden the pot" by letting taxpayers deduct half the cost of repairs they make to appliances like refrigerators, ovens, and dishwashers. This makes repairs cheaper and helps keep repairmen employed in Sweden. (We suppose it could be possible to outsource refrigerator repairs to China or Mexico, but your food would probably melt before it gets back.)
Sweden's Minister for Financial Markets, Per Bolund, told BBC News, "I think it will be a good incentive and I think there's also a possibility that people will buy high-quality products and repair them, rather than buying cheap products they know will break down and then buy something new instead." He estimates the new law will cost Sweden about $250 million krona, not to mention slowing the growth of landfill fjords.
As long as we're on the topic of taxes and maintenance . . . how's your tax plan looking these days? Still shiny and new? Or showing some wear and tear at the seams? Tax planning isn't something you do just once and forget about. It's an ongoing process that needs periodic maintenance and tuning. So count on us to help keep your plan running in tip-top shape! (And if you don't already have a plan, what are you waiting for?) And when I fix or build your tax plan, I won't have any leftover parts like I did when I built my last IKEA bookshelf.