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How privatisation of Social and welfare services in Sweden brings riches and tax evasion to the big guns

Wednesday, 21 December 2011
As the Swedish government presses on with the privatisation of social services, it has emerged today that a company running schools in Sweden and which has been making massive profits decided to declare its accounts in tax havens.

Swedish television reports that a private school consortium, Academedia, owned by venture capitalists, made new record profits last year, according to the latest annual report that has now been published. The television’s audit shows that Skr900 million of tax revenue is expected to go to interest to be paid on “loans” the private equity firm used to buys new schools.

The company is the largest single independent body that owns school in Sweden, and last year's profit was the highest ever - Skr208 million according to Swedish television. Last full-year profit was 2009, and stood at Skr169 million. The owners, private equity firm EQT, chooses not to levy any dividend:

“The profit goes to improving the quality and to invest in new schools,” says Johan Hähnel spokesman at EQT to Swedish televsion.

Private equity business that have investment in schools and health care are often unable to pick out high annual profits, Bu their strategy is to grow their businesses and get bigger, and then sell them at a hefty profit after a few years. Within EQT, their average is about five years before they’ll resell.

This also reflects the way businesses are done in Sweden. Too much capital is required to run real business in Sweden as such company must be big to be able to operate well. This why Sweden has fewer very big companies and almost void of smaller companies, except small IT forms of companies,  that emerge and dies without even striking their first deal. 

Other private equity-owned companies such as Carema which operated care management received strong criticism even from the top, the Finance Minister, Anders Borg, as they had carried out a sophisticated tax planning system that them ferrying their takes out of the country while patients dies of lack basics.

But Academedia is reported to have loans of around Skr2.2 billion. Interest costs end up at about Skr180 million a year. If venture capitalists own the company for five years, it is therefore would have generated Skr 900 million just in interest alone. Money that is paid with the surpluses to build up by taxpayers in the form of the pupil's wage.

Johan Hähnel, believes that the placement of taxes in tax havens is not about to evade tax, but is a way of ensuring international investors to avoid double taxation.

On the whole, past reports have shown that figures from Swedish teachers association showing that privately owned schools by these sorts of companies get away with lower staffing ratio than public schools and other private schools, run by foundations and nonprofits organizations.
Academedia primary activity for example,  Vittra has more than six teachers for 100 students while public schools, on average has more than eighth
But Johan Hähnel means that profits are not due to too few teachers, but the dedicated employees and the economies of scale.
By Scancomark.se Team

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