Working Paper No. 1000

Swedish Wealth Taxation (1911–2007)

Published: January 2, 2014, revised January, March and October 2014, and September 2015Pages: 51Keywords: Wealth tax; Tax avoidance; EntrepreneurshipJEL-codes: H20; K34; D31
Published version

Swedish Wealth Taxation (1911–2007) Gunnar Du Rietz and Magnus Henrekson

We study the evolution of modern Swedish wealth taxation since its introduction in 1911 until it was abolished in 2007. A thorough description of the rules concerning valuation of assets, deductions/exemptions and tax schedules to characterize effective wealth tax schedules is presented. These rules and schedules are used to calculate marginal and average wealth tax rates for a number of differently endowed owners of family firms and individual fortunes.

There was rising trend in the wealth tax rate until 1971 for owners of large and medium-sized firms and for individuals having equally sized similar non-corporate wealth. Average wealth tax rates were low until 1934, except for 1913 when a temporary 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 holders of equally sized non-corporate wealth. 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 lowered in 1991 and in 1992 and then remained at 0.5−1 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 difference was much smaller if owners of large fortunes could benefit from the reduction rules. The effective wealth tax became much greater if firm owners had to finance wealth tax payments through additional dividend payouts. In such cases the effective total wealth tax rates were sharply increased as a result of high marginal income tax rates and peaked at extremely high levels in the 1970s and 1980s. Aggregate wealth tax revenues were relatively small: they never exceeded 0.4 percent of GDP in the postwar period and amounted to 0.16 percent of GDP in 2006.

Magnus Henrekson


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