Once upon a time, long, long ago (well actually in 1975) in a land far, far away (Sweden) there lived a kindly fairy godmother named Astrid Lindgren. Astrid brought smiles to the faces of children from all over the world with her stories of Pippi Longstocking and other charming characters. Indeed, her stories were so popular that her books became very successful and sold in vast numbers. Her royalty income just grew and grew. And she lived happily ever after?
Well, not quite! A big bad wolf in the form of the Swedish Social Democrat Government had other ideas. It introduced a new tax regime that meant self-employed individuals had to pay both regular income tax and employer’s fees. In Lindgren’s case this meant a marginal tax rate of 102%. Unbelievable. She had to pay more in tax than she actually earned.
This idiocy has subsequently been dubbed the ‘Pomperipossa Effect’ after a allegorical story ‘Pomperipossa in Monismania’ (in English ‘Pomperipossa in the World of Money’), which she published in Stockholm’s evening tabloid newspaper, Expressen, on 3 March 1976. Even the Swedes, who are normally fairly passive over high levels of tax, were incensed. It was no accident that later that year the Social Democrats were thrown out of government after being in power for 44 years.
So there was a happy ending. Astrid Lindgren did live happily ever after paying a mere 80% of her income – she died in 2002. However, this isn’t a fairy story – more a horror story. The big bad wolves haven’t gone away. They have spread out from Sweden to join governments all around the globe. Don’t be surprised when the nightmare of the Pomperipossa Effect suddenly reappears in your country.
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