Sweden's little-known tax cut could revive Britain's moribund economy

In 1971, Roland Huntford, Stockholm correspondent for The Observer, published a scathing critique of the „soft dictatorship” exhibited by the Social Democratic government in his book The New Totalitarians. Individual freedom was replaced by social security and the government is said to have orchestrated a cultural change reminiscent of Huxley's Brave New World. Today, more favorable interpretations praise Sweden as a socialist utopia. But this view is increasingly outdated.

The more liberal aspects of the Swedish economy are not known to outsiders. One such feature is the abolition of gift and inheritance tax by the Social Democratic Government with effect from December 2004. Yet the Swedish example may give the British chancellor a leg up amid speculation he could scrap inheritance tax entirely or at least significantly. Raise the threshold.

Both critics and champions of Scandinavian socialism may be surprised to learn that the Swedish parliament unanimously called for an end to the tax, but there were good reasons for the consensus. First, the tax brought in less than 0.2 percent of all tax revenue. This is a similarly low share in the UK, at 0.7 per cent of all tax receipts. This money was raised by expenditure; People were forced to spend their tax payments instead of running their companies. This led to the exodus of Swedish companies and job losses. Since the cancellation, entrepreneurs have returned. We have a well-oiled venture capital market, and only Silicon Valley beats Stockholm for its number of unicorns per capita.

Second, many considered it an unfair and unwieldy tax on already taxed capital. A triple taxation of income, savings and, finally, inheritance money, which entangled businesses and governments in unnecessary red tape. And if the wealthy were the target, the consequences often fell elsewhere. A wealthy Swede can legally avoid tax through tax planning, while grieving low- and middle-income families are stuck with another bill.

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Even the wealthy felt its punitive effects. Sally Kistner, the widow of the founder of the pharmaceutical company Astra (now AstraZeneca), inherited a fortune built mostly in stocks. Coupled with additional capital gains tax and an unfortunate stock market crash, the inheritance tax far exceeded the value of the estate, forcing him to file for bankruptcy.

This case and others are well-documented in a 2015 paper on the Swedish inheritance tax by Anders Judstedt and Amanda Volstad, which was mourned and missed by some. The present state of mind in England suggests that an article on a similar subject may be published here.

Of course, there are differences between the two countries. More Swedes own their property than Britons. At the time of the cancellation, 90% of Swedish companies were owner-led or family-owned, including giants such as H&M and IKEA. In the UK, companies are generally owned by „professional” management, with different approaches to capital and succession. Yet the injustice, inefficiency and harm to employment found in Sweden abounds here in the UK. As property values ​​have risen over the past generations, thresholds have not always protected the poor. Meanwhile complex legislation means relief is only available to those who can afford to pay for advice.

Sweden is far from a „brave new world,” neither Huxley nor the socialists. Not the „tax paradise” described by domestic leftists who yearn to reintroduce inheritance tax; It still has the 8th highest tax burden among OECD countries. However, repealing inheritance tax in such a context proves that where there's a will, there's a way. In the UK, there is a growing desire to abolish the tax amid arguments familiar to the Swedes. The way is in the hands of the British Chancellor.

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