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

Author

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  • Henrekson, Magnus

    () (Research Institute of Industrial Economics)

  • Waldenström, Daniel

    () (Uppsala Center for Fiscal Studies)

Abstract

This paper studies the evolution of the modern Swedish inheritance taxation from its introduction in 1885 to its abolishment in 2004. Our contribution is twofold. First, we compute annual effective inheritance tax rates for differently sized bequests and different types of inherited assets (non-firm wealth and family firm equity), ac-counting for all relevant exemptions, deductions and valuation discounts. Second, we try to account for the changes in inheritance taxation. Ideology rather than mass mobili-zation or revenue maximization appears to drive the sharp tax increases of the 1930s through the 1960s. We document increased opportunities for tax planning for the wealthy, in particular a series of drastic tax cuts on inherited family firms from the 1970s onwards. This rise of avoidance opportunities for the rich, while more and more middle-class heirs paid notable inheritance taxes, contributed to a loss of legitimacy for the tax and its ultimate repeal in 2004

Suggested Citation

  • Henrekson, Magnus & Waldenström, Daniel, 2014. "Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance," Working Paper Series, Center for Fiscal Studies 2014:9, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uufswp:2014_009
    as

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    References listed on IDEAS

    as
    1. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    2. 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.
    3. Thomas Piketty & Emmanuel Saez, 2013. "A Theory of Optimal Inheritance Taxation," Econometrica, Econometric Society, vol. 81(5), pages 1851-1886, September.
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    11. 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.
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    Cited by:

    1. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2015. "Inheritance and wealth inequality: Evidence from population registers," Working Paper Series, Center for Fiscal Studies 2015:3, Uppsala University, Department of Economics.
    2. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute for the Study of Labor (IZA).
    3. Frank A Cowell & Chang He & Dirk Van de gaer, 2017. "Inheritance Taxation: Redistribution and Predistribution," STICERD - Public Economics Programme Discussion Papers 35, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    4. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    5. 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.

    More about this item

    Keywords

    Gift tax; Inheritance tax; Estate tax; Tax avoidance; Excess burden; Entre-preneurship; Ownership transfers of family firms;

    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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