New Swedish Government Hit By Tax Scandal

Sweden's new centre-right government is facing a crisis a month after its election victory as a second minister quit yesterday in a row over tax avoidance.

Hours before the coalition government presented its first budget, the culture minister resigned after admitting she had failed to pay her television licence for 16 years and that she had been paying her nanny cash in hand. Cecilia Stego Chilo, who oversaw funding for Sweden's state broadcaster STV, was among 124 MPs who have admitted not paying the licence fee.

Her resignation came two days after the trade minister, Maria Borelius, quit following her admission that she had also avoided taxes by paying her nanny cash.

The resignations overshadowed the budget yesterday, which centred on tax cuts of 42bn kronor (£3bn) funded by cuts to unemployment benefits. Fredrik Reinfeldt, 41, the prime minister, won last month's election promising a fresh start. His four-party Alliance for Sweden ousted the Social Democrats, who have led Sweden for all but 10 of the past 89 years.

The two ministers issued statements, admitting irregularities. Ms Stego Chilo said: "By not paying my television licence fee and employing black-market domestic help in the period before becoming minister, I have committed errors which are not acceptable, but which I have attempted to rectify as far as possible."

Ms Borelius said she had employed cleaners and nannies in the 1990s without paying employer's taxes. Her position became untenable when Mr Reinfeldt hired a lawyer to investigate claims that she avoided paying property tax on a summer house by registering it to a corporation in the Channel Islands.

The minister did not help her case when she said she and her husband, who are relatively wealthy, could not have afforded nannies if they had paid taxes.

The second resignation is dangerous for Mr Reinfeldt who targeted his election at Swedes still attached to the "social model", which delivers strong social benefits paid via relatively high taxes.

At least one other member of the government, the immigration minister, Tobias Villstrom, is among MPs who have admitted not paying for TV licences.

Mr Reinfeldt had hoped to burnish his modernising credentials with eye-catching ministerial appointments. Nyamko Sabuni, a Burundi-born Swede, was appointed minister for integration and community, while Anders Borg is Europe's first finance minister with a ponytail.