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Taxes, frictions and asset shifting: when Swedes disinherited themselves

Author

Listed:
  • Escobar, Sebastian

    (University of Munich)

  • Ohlsson, Henry

    (Uppsala University)

  • Selin, Håkan

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

Abstract

We study tax-driven intergenerational asset shifting using a salient tax discontinuity and rich data on both donors and recipients. When the Swedish inheritance tax was in place, heirs could lower their inheritance tax bills by passing on part of the inheritance to their children. We present evidence on strong and precise responses to this incentive. We quantify optimization frictions, and we show that they are small in this setting. Both intensive and extensive margin policy responses can be rationalized by a simple model in which agents face small frictions at the extensive margin. Descriptive evidence suggests that the policy response is associated with the abundant supply of cheap legal advice on tax planning.

Suggested Citation

  • Escobar, Sebastian & Ohlsson, Henry & Selin, Håkan, 2019. "Taxes, frictions and asset shifting: when Swedes disinherited themselves," Working Paper Series 2019:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2019_006
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    Cited by:

    1. Glogowsky, Ulrich, 2021. "Behavioral responses to inheritance and gift taxation: Evidence from Germany," Journal of Public Economics, Elsevier, vol. 193(C).
    2. 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.
    3. Margit Schratzenstaller, 2023. "Behavioral Responses to Inheritance Taxation. A Review of the Empirical Literature," WIFO Working Papers 668, WIFO.
    4. Erixson, Oscar & Escobar, Sebastian, 2020. "Deathbed tax planning," Journal of Public Economics, Elsevier, vol. 185(C).

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    More about this item

    Keywords

    tax avoidance; tax rate elasticity; inheritance taxation; inter vivos gifts;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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