The European Commission has announced that it will refer Sweden to the European Court of Justice (ECJ) over its allegedly discriminatory pension tax legislation. Under Swedish law, pension insurance premiums paid by employers into Swedish-based pension insurance funds are exempt from taxes, while pension payments are taxed. In contrast, premiums paid to foreign pension funds are taxed on the same basis as employee salaries, while pension payments are tax exempt. This scheme may make subscription to foreign pension funds unattractive because (i) the taxation takes place earlier, and (ii) employees are potentially subject to a higher overall tax rate during their working lives. The Commission contends that by discriminating against pension funds based in other EU Member States and EEA countries, Swedish law is inconsistent with the principles of free movement of persons and capital, and the freedom to provide services. If the ECJ agrees, Sweden could be forced to change its laws or face fines.