Lessons from the Swedish Inheritance Tax

Sebastian Escobar-Jansson, Researcher in Economics at the Ludwig-Maximilians-Universität München

In 2004, Sweden repealed its inheritance tax. There were several problems associated with the tax, and the revenues it raised to the government were rather small. This is noted by the researcher Sebastian Escobar-Jansson, who has done a study for SNS on the lessons that can be drawn from the Swedish inheritance tax, as it was constructed before the repeal.

The Swedish inheritance tax had a progressive form and small exemptions. As in other countries, the yearly revenue raised by the Swedish tax was rather small: at most 3 billion kronor, about 0.1 percent of GDP.

The results of the study suggest that inheritances of all sizes were under-reported, but that the larger inheritances were under-reported to a greater extent.

– My calculations suggest that the average tax payment would have been 30‒70 per cent larger, if no under-reporting had taken place, says Sebastian Escobar-Jansson, researcher in economics at the Ludwig-Maximilians-Universität München.

Today, Sweden is one of the few countries within the EU-15 that doesn’t have an inheritance tax. In the study, the author surveys the arguments for and against reintroducing an inheritance tax.

According to the author, it is not possible to empirically estimate the effects of an inheritance tax on a country’s consolidated public finances in longer terms. One of the reasons is that empirical research on the size of the effects of an inheritance tax on employment and savings is lacking.

The report is a publication within the SNS research project “Taxes in a Globalised World”.