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Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance

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Abstract

This paper studies the evolution of Swedish inheritance taxation since the late nineteenth century to its abolition in 2004. Our contribution is twofold. First, we compute the annual effective inheritance tax rates for different sizes of bequests, if the inherited assets were family firm equity or not, accounting for all relevant exemptions, deductions and valuation discounts. Second, we attempt to explain changes in inheritance taxation over time. Ideology appears to be the main driver of the sharp tax increases of the 1930s through the 1960s. Wartime economies with higher pressures on the people induced politicians to raise inheritance taxes on the wealthy, primarily during the First World War. We also document increased opportunities for tax planning for the wealthy, most notably a series of tax cuts on inherited family firms in the 1970s. This rise in avoidance opportunities for the rich while middle-class heirs face growing inheritance tax rates undermined the legitimacy of the tax and led to its repeal.

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  • Henrekson, Magnus & Waldenström, Daniel, 2014. "Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance," Working Paper Series 1032, Research Institute of Industrial Economics, revised 28 May 2015.
    • Handle: RePEc:hhs:iuiwop:1032
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    Citations

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    Cited by:

    1. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    2. Adrian Adermon & Mikael Lindahl & Daniel Waldenström, 2018. "Intergenerational Wealth Mobility and the Role of Inheritance: Evidence from Multiple Generations," Economic Journal, Royal Economic Society, vol. 128(612), pages 482-513, July.
    3. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2020. "The rise and decline of industrial foundations as controlling owners of Swedish listed firms: the role of tax incentives," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 68(2), pages 170-191, May.
    4. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute of Labor Economics (IZA).
    5. Tisch, Daria & Schechtl, Manuel, 2023. "The Gender (Tax) Gap in Parental Transfers. Evidence from Administrative Inheritance and Gift Tax Data," SocArXiv kfetw, Center for Open Science.
    6. Spencer Bastani & Daniel Waldenström, 2019. "Salience of Inherited Wealth and the Support for Inheritance Taxation," World Inequality Lab Working Papers hal-02877003, HAL.
    7. Frank A. Cowell & Dirk Van de gaer & Chang He, 2018. "Inheritance Taxation: Redistribution and Predistribution," Research on Economic Inequality, in: Inequality, Taxation and Intergenerational Transmission, volume 26, pages 1-13, Emerald Group Publishing Limited.
    8. Stefan Jestl, 2021. "Inheritance tax regimes: a comparison," Public Sector Economics, Institute of Public Finance, vol. 45(3), pages 363-385.
    9. Alexander Krenek & Margit Schratzenstaller-Altzinger & Klaus Grünberger & Andreas Thiemann, 2021. "INTAXMOD – Inheritance and Gift Taxation in the Context of Ageing," WIFO Working Papers 645, WIFO.
    10. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    11. Henrekson, Magnus & Stenkula, Mikael, 2015. "Swedish Taxation since 1862: An Overview," Working Paper Series 1052, Research Institute of Industrial Economics, revised 10 Sep 2015.
    12. Ohlsson, Henry & Roine, Jesper & Waldenström, Daniel, 2014. "Inherited wealth over the path of development: Sweden, 1810–2010," Working Paper Series, Center for Fiscal Studies 2014:7, Uppsala University, Department of Economics.
    13. Daniel Waldenström, 2018. "Inheritance and Wealth Taxation in Sweden," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(02), pages 08-12, August.
    14. Spencer Bastani & Daniel Waldenström, 2018. "How should capital be taxed? The Swedish experience," World Inequality Lab Working Papers hal-02878153, HAL.
    15. Margit Schratzenstaller, 2023. "Behavioral Responses to Inheritance Taxation. A Review of the Empirical Literature," WIFO Working Papers 668, WIFO.

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    More about this item

    Keywords

    Gift tax; Inheritance tax; Estate tax; Tax avoidance; Excess burden; Entrepreneurship; Ownership transfers of family firms;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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