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Swedish Wealth Taxation (1911–2007)

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Abstract

This paper studies the evolution of modern Swedish wealth taxation since its introduction in 1911 until it was abolished in 2007. It offers a thorough description of the rules concerning valuation of assets, deductions/exemptions and tax schedules to characterize effective wealth tax schedules for the period 1911–2006. These rules and schedules are used to calculate marginal and average wealth tax rates for the whole period for a number of differently endowed owners of family firms and individual fortunes. The overall trend in the direct wealth tax was rising until 1971 for owners of large and middle-sized firms and for individuals of similar wealth consisting of non-corporate assets. Average direct wealth tax rates were low until 1934, except for 1913 when a temporary extra progressive defense tax was levied. There were three major tax hikes: in 1934, when the wealth tax was more than doubled, in 1948 when tax rates doubled again and in 1971 for owners of large firms and similarly sized non-corporate fortunes. Effective tax rates peaked in 1973 for owners of large firms and in 1983 for individuals with large non-corporate wealth. Reduction rules limited the wealth tax rates from 1934 for fortunes with high wealth/income ratios. The wealth tax on unlisted net business equity was abolished in 1991. Tax rates for wealthy individuals were decreased in 1991 and in 1992 and then remained at 0.51 percent until 2006, depending on whether the reduction rule was applicable. Tax rates for small-firm owners and small individual fortunes were substantially lower, but the tax difference was much smaller when owners of large fortunes could benefit from the reduction rules. The effective wealth tax was much greater if firm owners had to finance wealth tax payments through additional dividend payouts. In such cases the effective total wealth taxes were affected by high marginal income tax rates and peaked at extremely high levels in the 1970s and 1980s. Towards the end of the wealth tax regime, aggregate wealth tax revenues were relatively small: it never exceeded 0.4 percent of GDP in the postwar period and amounted to 0.16 percent of GDP in 2006.

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  • Du Rietz, Gunnar & Henrekson, Magnus, 2014. "Swedish Wealth Taxation (1911–2007)," Working Paper Series 1000, Research Institute of Industrial Economics, revised 10 Sep 2015.
  • Handle: RePEc:hhs:iuiwop:1000
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    1. Du Rietz, Gunnar & Henrekson, Magnus & Waldenström, Daniel, 2012. "Swedish Inheritance and Gift Taxation, 1885–2004," Working Paper Series 2012:18, Uppsala University, Department of Economics, revised 04 Aug 2015.
    2. Du Rietz, Gunnar & Johansson, Dan & Stenkula, Mikael, 2013. "Swedish Labor Income Taxation (1862–2013)," Working Paper Series 977, Research Institute of Industrial Economics, revised 10 Sep 2015.
    3. Steven J. Davis & Magnus Henrekson, 1997. "Industrial Policy, Employer Size, and Economic Performance in Sweden," NBER Chapters,in: The Welfare State in Transition: Reforming the Swedish Model, pages 353-398 National Bureau of Economic Research, Inc.
    4. Ohlsson, Henry, 2011. "The legacy of the Swedish gift and inheritance tax, 1884–2004," European Review of Economic History, Cambridge University Press, vol. 15(03), pages 539-569, December.
    5. Stenkula, Mikael, 2014. "Taxation of Real Estate in Sweden (1862–2013)," Working Paper Series 1018, Research Institute of Industrial Economics, revised 10 Sep 2015.
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    1. Du Rietz, Gunnar & Johansson, Dan & Stenkula, Mikael, 2013. "Swedish Labor Income Taxation (1862–2013)," Working Paper Series 977, Research Institute of Industrial Economics, revised 10 Sep 2015.
    2. Magnus Henrekson & Daniel Waldenström, 2016. "Inheritance taxation in Sweden, 1885–2004: the role of ideology, family firms, and tax avoidance," Economic History Review, Economic History Society, vol. 69(4), pages 1228-1254, November.
    3. 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.
    4. Stenkula, Mikael, 2014. "Taxation of Real Estate in Sweden (1862–2013)," Working Paper Series 1018, Research Institute of Industrial Economics, revised 10 Sep 2015.

    More about this item

    Keywords

    Wealth tax; Tax avoidance; Entrepreneurship;

    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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