Cashless Sweden Pt. 2

I've posted a few times in the past about the move away from cash in Swedish society. It is harder and harder to spend our kronor these days. The airport and Stockholm city center are still cash-friendly, but it isn't easy to spend money in the archipelago.

This article from the Guardian shows very clearly how efficiently cash has been left behind in favor of digital alternatives, for better or worse.

Cash has been replaced by credit cards, of course, but also Swish, a payment system which links one's bank account, allowing super-simple transfer of sums back and forth. It's become a verb now: to 'swish' someone a few kronor.

Those of us without national ID numbers, though, can't register for Swish. I still havehope there will be some way for us to be part of the Swish system once we start spending more time in Sweden this summer!

I will keep my readers informed on how I get on.

Unintended consequences

I posted over two years ago about Sweden's progress in becoming a cashless society. I can report that project is still on track. It's no longer a surprise to find small shops that take cards these days; I find more and more places that refuse to take cash last all. Some in the government are wondering if things are changing too fast.

The scarcity of cash is causing Sweden's criminals to change their behavior. A recent article in The Atlantic points out that besides fraud and cybercrime being on the rise, so is old-fashioned theft of valuable objects.

Going cashless can certainly help the tax authorities, and it is much more convenient for the seller and buyer alike. But sometimes fixing one problem just causes another...

The Big Mac Index

It's been a few years since I posted about the Economist's Big Mac Index. I think it's time for a revisit.

To recap, the Economist started the index as a way to measure global currencies against the dollar. McDonald's is very good at making their Big Mac exactly the same everywhere. In a perfect world, the currency-adjusted cost of a Big Mac in each country would also be the same as the cost in the US.

Any disparity over or below the US cost would expose that currency as overvalued or undervalued against the dollar. Over the years, the index has become more sophisticated. Their most recent index is a lovely interactive website that allows looking at all sorts of data in a range of countries.

The currency we're most interested in is the kronor, of course. It has been consistently overvalued against the dollar; in fact, the Swedish currency has been consistently overvalued for more than a decade, along with the Norwegian kronor and Swiss franc.

The good news is that lately, the kronor has been much closer to its "true" value. The Economist calculates that the kronor should be about 9.5 to a US dollar. Lately it's been about 9.2. This is as close as its gotten to parity in almost 15 years. Now if we could do something about the Pound Sterling!

Pensionsmyndigheten

When we lived in Sweden those many years ago, Sooz worked for almost two years for a Swedish company.

We were struck recently that she may be eligible for a state pension because of her contributions during her employment.

It took some doing to figure everything out. As a non-resident, we had to file a request through the UK to apply to Sweden on our behalf.

After a bit of back and forth, we received word from the pensionsmyndigheten that Sooz was indeed eligible for part of the state pension payments. Effective today, she will receive a monthly payment.

It's not much, perhaps a bit of a subsidy for box wines, but it is something towards our Swedish retirement!

New money

I saw a few stickers on cash registers last week with pictures of Swedish notes crossed out and a date of June 30th.

A closer look showed the 20, 50, and 1000 kronor notes are being taken out of circulation in the next couple of months, replaced by newer, more secure versions. I'll admit I had completely missed this news.

Next year, the 100 and 500 kronor notes will be withdrawn, along with the coins.

I looked at my cash (as I said recently, Sweden is pretty cashless already) and found some old bills. I'll be spending them them in advance of the changeover!

Cost of Living Index

I found a fascinating interactive chart at the Economist website.

It shows the current cost of living in a number of world cities, using New York as the baseline.

Singapore retains its #1 spot as most expensive. London is 6th, just ahead of New York at 7th.

Copenhagen is 8th, but I was surprised to see that Stockholm has fallen all the way to 42nd! Much of this is the strength of the dollar. Looking at the chart for five or ten years ago gives a different story.

I had quite a lot of entertainment looking at this chart, and I hope my dear readers will enjoy it as well.

Cashless Sweden

I have found that, over my years in Sweden, every place I go accepts debit cards. I've paid for hot dogs at a kiosk, and my taxi boat through a wireless dongle while on the high seas. I've sent money electronically all over Sweden for all sorts of business and personal reasons.

The New York Times has written recently about Sweden's progress in becoming a cashless society. Old-fashioned physical money represents just 2% of Sweden’s economy, compared with 7.7% in the United States. The Guardian has a similar article, pointing out that robberies have fallen in line with the lack of money available to steal.

Although I haven't seen it yet myself, apparently many ATM machines have been removed due to lack of use, and some bank branches no longer keep cash. It's not just credit cards, too. Camille uses an iPhone app called 'swish' to send and receive small amounts quickly and easily.

It's not just the citizenry that endorses going cashless. Skatteverket, the Swedish tax authority, loves eliminating cash transactions. The high tax rates in Sweden give ample incentive to tax dodge when possible. Paying a workman in cash in an undocumented transaction avoids the payment of VAT, which can be as high as 25%. Of course, Skatteverket does a great job of chasing down such activity.

Despite such work, the shadow economy in Europe is still huge, nearly a half-trillion euros last year. In Bulgaria, 31% of the country's economic activity is off the books. In Sweden it's still over 13%.

As more transactions take place online, more taxes can be collected, which is something the Swedish authorities love!

A reply from Vattenfall

Regular readers may remember that we found the power off at our house when we arrived in June. With Tony's help, we found it was a faulty meter from Vattenfall, our electricity provider.

Sooz took careful note of all the food that had been ruined, and we calculated our loss was about 1300 kronor. We sent along our information to Vattenfall for compensation.

I heard back recently, and it appears our work to document our loss wasn't necessary. The Swedish power regulations set out rules for compensation for a power cut. Our power was out for 10 days, which means we are due a payment of 10,600 kronor!

That will cover our lost food and inconvenience quite nicely.

Skatteverket

The dark blue envelopes from the nice people at Skatteverket arrived recently. I've written before about my dealings with the Swedish tax authorities. Looking back, I was always concerned that my tax bill was always zero. That is pretty funny; most people would be thrilled with no tax bill!

Last October, I wrote that I expected a bill this year of 5-6000 kronor. I am ironically happy to report that I did indeed receive a bill this time, of 3500 kronor. So I was right about the timing, although the amount was about half.

In subsequent years, though, I think my bill will raise to the amount I was expecting. There is a period of transition from a zero tax rate to the full rate. Even the Swedish tax authorities don't give the full whack on the first year!

The rest was easy. I was able to file my taxes over the phone, through an English-speaking automated phone line. A few clicks online through my Nordea account paid my bill instantly.

If only my dealings with the IRS here in America were as simple (or as cheap!)

The Return of Skatteverket

I received my property tax declaration from the nice people at Skatteverket, the Swedish tax authorities.

Readers of this blog with long memories may remember that I received my last one almost three years ago.

It was quite straightforward; essentially all it asked was if I had made any changes to the property which may have increased its value. Instructions in English were available online.

The list of things impacting the value of a house are wide-ranging. Besides basic things like the size of the house and its construction material, there are others: How close is it to the water? Does it have a basement, a heating system, a garage, a flush toilet, a second floor? How nice is the kitchen?

Actually, the kitchen question was relevant for us this time around. After reading the description, it was clear that our kitchen is now a "normal standard," so I made that change on this declaration.

I did note that adding a värmepump won't change the value of the house for tax purposes. In fact, nothing I would realistically do to our little stuga would move it into a higher tax bracket, thankfully.

Next year should be the first year I will have to pay property taxes on our house. I think my bill should be in the range of 5 to 6 thousand kronor ($600-800). This depends, of course, to no changes to the Swedish tax code in the meantime. So we shall see...

Exchange rates

The dollar has strengthened a lot against the kronor lately. It's over 7.1 to the dollar today. (There's a real-time widget along the right edge of the blog below.)

I wonder if I should add to my little bank account over there....

UPDATE: I think perhaps I should explain why the kronor is weakening right now. I'm no financial expert by any means, but I see three factors.

First, as the Economist explained earlier this summer, Swedish authorities may have raised interest rates too quickly in relation to other European economies, which dampened the country's economic recovery.

Second, the overall economic climate in Europe is weaker than America's, and is in some ways, getting worse. The European Central Bank recently lowered their interest rates to near zero in a surprise move to stimulate the eurozone's economy. So, by comparison, the dollar looks stronger.

Lastly, Sweden has an election this Sunday. To put it simply, the current center-right government is trailing in the polls to the more traditionally leftist parties. Although the facts are more complicated, the overall fear is that a new government would be more socialist and less business-friendly. This concern causes the economic markets to look less favorably on doing business in Sweden, hence the pressure on the kronor.

The Big Mac Index

The Economist has published something they call the "Big Mac Index" for over 25 years. It started as a light-hearted look at purchasing power parity amongst countries around the world.

The idea is simple: the average cost of a Big Mac in the USA is set as the baseline. The cost of a Big Mac in another country is compared to the US price. Comparing the two prices gives an "hamburger exchange rate," if you will. This can be compared to the actual currency exchange rate.

This year's index is interactive, and it has kept me entertained for some time now. Of most interest for our readership, of course, is how a certain Nordic country fares in the index.

It appears that Sweden has one of the most overvalued currencies in their league table. In fact, in this past year, the official exchange rate for the kronor was almost 75% lower than the Big Mac rate, and that's been consistent over the years.

Is this good news or bad news for an ex-pat such as myself? That depends on your point of view. For transferring money from the US right now, it's not that great. My dollar buys almost 10% less than it did last summer. On the other hand, the value of my home in Sweden is commensurately higher in dollars. So short-term, a strong kronor is a bother; long-term it's a good thing.

A report from the Economist

This week's Economist has a number of articles on the Nordic countries worth a read.

The first talks about how Sweden, Denmark, and Norway seem to have found a new model, "avoiding both southern Europe’s economic sclerosis and America’s extreme inequality." It also counters many of the myths of Scandinavia being a socialist tax-and-spend paradise; for example, Sweden's budget deficit is 0.3% of GDP; America’s is 7%.

The second article talks a bit more about how it's being done. Simply put, "rather than extending the state into the market, the Nordics are extending the market into the state."And it seems to be working right now: "the Nordics dominate indices of competitiveness as well as of well-being."

Scandinavian countries still have a number of advantages over other countries in the EU. Their economies are small and relatively homogeneous. They have good infrastructure and high education levels. But still, it's hard to govern at all, let alone well. For the time being at least, Sweden, Norway, and Denmark are doing it well, indeed.

Electricity analysis

I posted earlier this year about electricity use over the past 3 years. This chart is a bit different.

Here, I'm comparing the temperatures against the energy usage. There are lots of websites with historical weather data. I used the mean low temp for each two month period. Clicking on the chart makes it full-size.

It's no shocker to say that, the colder it gets, the more electricity gets used.

Yellow arrows indicate times we stayed at the house; this explains the ginormous spike at Christmas 2010. In fact, that spike is quite instructive. If and when we spend more time at the house in the spring and fall, we'll be paying a pretty penny (or öre) to keep the radiators on. We'll have to find a better way to warm the house... but that's a subject for discussing later!

Electricity Usage

I just received my bi-monthly bill from Vattenfall, our electricity supplier. The December/ January usage cost me 1255 kronor, which averaged to 10.47 kilowatt hours per day.

This compared favorably to the 20.3 and 16.9 daily averages I had the past two December/Januarys. Much of that is due to the warmer winter we've had so far, but we spent a few days at the house in December 2010, which accounts for the spike, because we were pumping every radiator in the house then.

I also have the thermostat set at 9°C on the bathroom radiator this winter, which I think helps prevent overheating the area.

The Cinderella is the other big driver of electricity usage when we're at the house; it uses more juice than a radiator. I've been tracking the electricity usage closely, and I think I have enough data to make a chart comparing the last three years. It's not exactly Moneyball, but I think it's interesting.

Skatteverket

I received a familiar dark-blue envelope in my Texas mailbox the other day. The nice people at the Swedish tax authorities, Skatteverket, have tracked me down.

Actually, I was at least partially pleased to see the forms, as it proved at least that I correctly sent in my new address. And, reading the documents inside, I was not that upset to see what Sketteverket sent me.

I've posted previously about being a bit uneasy that my tax bill has been zero. Not that I mind, of course, but, knowing the tax regime in Sweden, I know that 'zero' is not a number they use very often. I had a nagging feeling that one day, some unknown bill would come due.

My dark blue envelope contained a förslag småhusenhet fastighetstaxering which is essentially a property tax proposal. It asked me to review their data about our little house and to update it if needed, as changes to the size or fittings of a summer house change its tax value. The homeowner fills out a survey about many elements of the property, and the answers are used to determine the tax base. The form's instructions are available in English on Skatteverket's website for those interested.

The good news for me is that our property and our little house was accurately recorded in Skatteverket's questionnaire. So my concerns about not being on the tax rolls are abated; I obviously did it right the first time. Secondly, since there haven't been any substantive changes to the house, there's no need for me to send anything in. Our new home value will be sent to us in July 2012.

It appears that new home construction has a 5-year tax holiday, so I have a couple more years before I start supporting the social state.

Skatteverket

... is, as you may remember, the Swedish tax authority. My tax forms arrived to my Texas address this week, and once again, my net tax is zero. I like that figure, but I admit I still retain a nagging feeling that I should owe something.

Rutger happened to be visiting and he looked at my papers. He agrees that I have properly registered my house; all the numbers and names match, so I'm not hiding or misrepresenting anything. If the authorities say I don't owe them anything, I'm going to believe them.

Skatteverket has a cool iPhone app to submit your taxes; unfortunately, it doesn't work from the USA as their text number isn't recognized. I had to do it over the internet, but that took about a minute.

There's a wealth of info in English on the Skatteverket website. My favorite is "Purchasing and performing undeclared work in Sweden". These guys are serious about collecting tax on everything.

Taxes

Rutger is over this afternoon on a business trip and he took a look at my tax returns. The key part I missed was that the taxes are set based upon the owner of the property as of January 1, 2009.

Since I didn't register the house and land until October, Tony was still the official owner, and so I had no tax exposure this year. I filed online with just a couple of clicks.

I'll talk to Tony when I'm there in April about any bills he received for our land in 2009. Even though I wasn't yet registered officially, I should pay for those myself.

Skatteverket

...is the name of the Swedish tax authority. Today, at last, our tax returns arrived in the post. Sooz and I each received a mailing; the house, and our bank account, is 50-50 in both our names.

We were given a little pamphlet in English for "people who live in another country". Reading through the documents, it's clear we have to file a return as we own a property in Sweden. It appears, though, that's all we have to worry about as we have no other income in the country.

All the pre-filled areas on the return show zero, so I just can't hit 'send' on the internet. I'm sure we have to pay taxes on our house in some fashion! From what I can tell, we would owe 6,362kr in municipal tax on a detached dwelling.

I've made a scan and will email the documents to Rutger for his advice. But I won't do it today as it is his birthday and I'll give him the day off. Happy birthday, buddy!

More electricity news

I got my Vattenfall invoice for December and January today. This was the first real 'winter' bill since the water machinery was installed.

The usage was about 17 kilowatt-hours per day during this period, contrasting with just over 5 daily in the summer. That seemed high to me at first blush, but I do have three separate heaters running right now:

1. A radiator in the bathroom primarily to keep the washing machine from freezing
2. The warming box under the house for the water systems
3. An electrical cable in the well hose to protect the water pump itself

If you figure each of these devices runs at around 500 watts each (remember it's been very cold lately), that would easily account for 17 kWh per day.

My original budget all those years ago was for about 2500kr per year on electricity. It looks like I was half right; my usage for 2009 was about 5000kr. I'd like to cut down on this electrical usage going forward. There may well be a lot of wasted heat I could avoid next winter. Can I turn down the thermostats? Is there another way to protect the washing machine? I'll be looking into all the ways I can save a watt or two.