Tax Dodge Row Costs Swedish Coalition Second Minister

Sweden's new centre-right government was facing a crisis a month after an historic election victory as a second minister resigned today in a row over tax avoidance.

Hours before the coalition government was due to present its first budget, the culture minister resigned after admitting that 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, stood down two days after the trade minister, Maria Borelius, resigned following her admission that she had also avoided taxes by paying her nanny cash.

The double resignations capped a dreadful weekend for Fredrik Reinfeldt, Sweden's 41-year-old prime minister who won over Swedes by promising a fresh start after 12 years of rule by the Social Democrats.

Mr Reinfeldt had hoped to stamp his authority today with a budget which would show that his four-party Alliance for Sweden was living up to its commitment to cut taxes. Instead his coalition has become the butt of jokes as the two ministers issued statements confessing to errors.

Ms Stego Chilo said in a statement: "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 admitted that she had employed cleaners and nannies in the 1990s without paying the usual 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 departing minister did not help her case - or the coalition's attempts to play down its right wing past - when she said that she and her husband, who are wealthy, could not have afforded to employ nannies if they had paid taxes.

The second resignation is highly dangerous for Mr Reinfeldt who carefully targeted his election at Swedes who are still attached to the country's "social model" which delivers strong social benefits paid through relatively high taxes.

The image of ministers either forgetting or refusing to pay taxes may provide a gift to the Social Democrats. At least one other member of the government, the immigration minister, Tobias Villstrom, is among 124 members of parliament who have admitted not paying their television licence.

Many rightwingers refuse to pay the fee out of protest, either because they do not like Sweden's state broadcaster or because they object to being taxed on what they do in the privacy of their home.

The double resignations represent a severe blow to Mr Reinfeldt, who had hoped to burnish his modernising credential with a series of eye-catching ministerial appointments. Nyamko Sabuni, a Burundi-born Swede, was appointed minister for integration and community while Anders Borg became one of the world's first finance ministers to have a ponytail.