Swedish municipalities and county councils cannot be declared bankrupt
The special status of the local government authorities in the Swedish constitution and their right to levy taxes mean that municipalities and county councils/regions cannot be declared bankrupt. Neither can they cease to exist in any other way. It is also prohibited to pledge local government property, meaning that municipalities and county councils/regions are responsible for commitments incurred with all of their assets and their full taxation power.
The right to levy taxes and set tax rates
Municipalities and county councils/regions in Sweden have a constitutional right to levy taxes for carrying out their remit. The tax base is based on the residents’ income, and each municipality and county council/region sets its own tax rate. Income from taxation accounts for just over 70 percent of total municipal revenue. The right to levy taxes is an important aspect of local self-government, which states that there must be an autonomous right of decision-making for municipalities and county councils/regions. The level of autonomy granted in Swedish local government is uncommonly high by international standards.