How did art in Sweden overthrow the government in 1976?

The tax turbulence was caused by the world-famous director Ingmar Bergman and the writer Astrid Lindgren. As a result, the Social Democrats, who had been in power for 44 years, lost the elections.

Jan 09, 2025

Art Saves the World

Tax Administration Humiliates Ingmar Bergman

These two cases seemed important in the context that in Bergman's case, the tax administration effectively drove a national treasure out of the country. This story coincided with a message sent to me yesterday by a large client that after a long fight with the SRS they have decided to move their business. Others say this for speculative purposes, but in the IT industry it is relatively easy for mobile young people with subcontractors and clients all over the world to do this.

Astrid Lindgren mocks the progressive PIT

In turn, Lidgren published a satirical tale about the Swedish tax system, at the same time. It is essentially about the fact that her taxes exceeded her income in the relevant year! It caused a wide public debate about the Swedish tax system and significantly influenced the results of the 1976 election. One might say that we in Latvia are far from the supposedly high tax rates of Scandinavia. But this story also leads to some other reflections, for example:

how much does the progressive PIT system support progress (the more you do, the higher the rate)?
how much do we base the tax system on values, not Excel tables?
we were just at the Ministry of Finance together with the Fintech Association to explain that startups do not receive loans if, due to our ThinCap restrictions, they have to pay CIT on % when the loan exceeds the 1:4 equity to debt ratio. There is no such restriction in Estonia. Like against a wall.

Ingmar Bergman

In 1976, the famous director was taken for questioning by the police for alleged tax evasion in transactions between his Swedish and Swiss companies. He used the latter to settle accounts with foreign actors. Although Bergman eventually paid a tax surcharge of SEK 150k, the suspicions of tax fraud were not justified and the government officially apologized to him. This turned out to be a painful moment not only for the director himself, but for all of Sweden, as the director eventually moved to live in Germany. However, the damage done by the tax authorities was irreparable. The director himself later commented that this caused him to fall into depression and essentially (him and the whole world) lost about 8 years of the film genius's productive work. There is an extensive coverage of this incident in the Swedish and world media, but here it is presented in the most detailed way I could find.

Astrid Lindgren

So what was written in this fairy tale dedicated to taxes, 'Pomperipossa in Monismania'?

Once upon a time in a certain country (let's call it Monismania, because it has to be called something), there lived Pomperipossa, which is a good name for fairy tales..

Everything is fine with values

Really, this country does not need the name Sweden or Latvia, because it reflects human values that are important anywhere. Pomperipossa loved her country and its people. Its leaders made sure that no one in the country was poor and everyone had a piece of the prosperity cake.

Even 80-83% in taxes was okay for Pomperipossa

During the time that I associate with the brightest moments of my childhood my dad, just like other dads in all corners of the world, read Carlson or The Lionhearts to me in the evenings. Around the same time, Pomperipossa received a letter from the tax office that she had to pay 80-83% in taxes, but she could keep 17-20% for herself. Despite other people's objections, she thought it was fair to achieve the aforementioned values.

However, there was a problem (there must be a problem in stories)

She continued to do what she liked best - to share her childishness and imagination with others. However, the more children in the world read her books, the poorer she became. The progressiveness of the tax system and the amendments adopted by the government ensured this. As a result, a friend asked Pomperipossa if she knew that she would now have to pay 102% in taxes? She replied: “Nonsense, such percentages do not exist.” But soon she got acquainted with the higher mathematics of Monismania, when you have to add up PIT and social security contributions.

Calculations..

So she trembled and trembled at the checks coming from all corners of the world for the books they had read, because they could not be predicted in advance. Then she sat down and started to calculate:

for the first 150k, she could keep 42k;
but if she received more than 1,850,000, she had to give 100% back to the state;
and an additional 2% makes up 37k;
so, out of 2 million, 1,995,000 goes to the state (1,850,000 + 108k (150-42) + 37k);
out of 2 million, 5k remains!

How is it elsewhere?

Then Pomperipossa met a friend from Russia who also wrote books that people liked. He paid 13% tax. Hmm.. USSR in 1976 doesn't seem like a good comparison.. I would definitely have preferred to live on Swedish social benefits at that time, if there was such a choice. However, she also found out that at that time in Ireland, writers were not subject to tax at all on such income.. That must be a lie, she thought..

Deductible expenses

Pomperipossa also looked at various deductions that are even mentioned in the media as being invented by smart lawyers to reduce the tax base for wealthy, well-known people. But what if chemistry is not Pomperipossa's favorite subject and she wants to do everything correctly? That's when a great idea came to her mind - there is an opportunity to go and ask for state benefits, because you can't survive on 5k a year! At that moment, she received a message from the tax administration that she wouldn't even have those 5k a year left, because the taxes to be paid on 2m are 2,002,000. And so she lived long and happily on state benefits... and Pomperipossa never wrote a single book again.