Swedish finance minister says tax hikes needed to boost finances

STOCKHOLM (Reuters) - Swedish Finance Minister Anders Borg will propose a number of tax rises in the government's spring budget to strengthen public finances and provide more money for education, he said in a radio interview on Saturday.

The centre-right Alliance, which is lagging in polls ahead of a general election in September, has cut taxes since it took power in 2006, but now says fiscal policy needs to be tighter as the economy recovers after the downturn.

"There is going to be a bit of a firmer grip both on the tax side and on the expenditure side in order to make room to finance a bit more investment in education," Borg said.

"It is car tax, it is tax on alcohol, but it could also affect a number of other taxes."

Borg said the government aimed at raising 1 billion Swedish crowns ($155 million) to 1.5 billion Swedish crowns from increased car tax, making an average Volvo around 200 crowns more expensive per year to drive.

Taxes on tobacco will also rise.

"I want to be clear in saying these are not the only taxes (that will be raised)," Borg said.

"In the period ahead and in the spring budget, we are going to put forward a number of bigger measures, because we believe that we need to make a number of investments, mainly in education and those need to financed, crown for crown."

Borg would not say how much the government aimed to raise through higher taxes or what other taxes could rise.

TOUGH LOVE

He also warned that even after the coming budget the government would consider further tax hikes.

Tax hikes are usually unpopular with voters and opinion polls put the four-party Alliance government around 10 percentage points behind the centre-left opposition led by the Social Democrats.

But the opposition is also planning tax hikes and the government is betting that having led the country through the recent economic crisis relatively unscathed, tough love will win over voters who prize Sweden's recent economic stability.

If it wins the election, Borg said the Alliance would focus on returning public finances to a surplus and building up buffers ahead of any future financial crisis.

"We absolutely do not plan to leave the 1 percent surplus target behind us," Borg said.

"We are going to get there by 2018 and if the economy is stronger, then we will naturally have a slightly bigger surplus, and by that build the safety margins we need."

($1 = 6.4544 Swedish crowns)

(Reporting by Simon Johnson; Editing by Sophie Hares)