What can we learn from Sweden’s abolition of IHT?
Of course, Sweden’s tax landscape was not always so accommodating. When FBN Sweden was founded three decades ago, Stefan Persson, the then principal owner of H&M, faced a pivotal decision: should he keep the company’s headquarters in Sweden or not? At an FBN board meeting, he presented letters from foreign governments competing to offer the most favourable tax conditions for growth. Swedish policymakers responded late but wisely, offering tax relief in exchange for moving the company from the main stock exchange to the OTC list. This allowed H&M to retain capital for expansion, benefiting not only the company but also Swedish pension savers and the broader welfare system. At the same time, FBN members were engaging with policymakers on the parliamentary tax committee. One family business, which had built rental housing in central Stockholm, told them that inheritance tax payments could have financed the construction of 200 new apartments! This, it seems, prompted even the most left-leaning politicians to reconsider the tax’s unintended consequences.
More than 20 years ago, Sweden took a bold step and abolished inheritance and gift taxes. Annelie Karlsson, CEO and Founder of Family Business Network Sweden tells the story behind it. “I recall it vividly. My mother passed away in November 2004 and her estate transferred to my father without tax.” As of that year, spouses could inherit without incurring inheritance tax, sparing many from the tragic consequence of having to sell their homes. The reform was a humane and pragmatic decision, led by forward-thinking Social Democratic policymakers. Originally scheduled for full repeal on 1 Jan 2005, inheritance and gift taxes were abolished earlier on 17 Dec 2004, in response to the devastating tsunami in South East Asia, which claimed the lives of many Swedes. The expedited timeline was a compassionate gesture to ease the burden on grieving families.
Annelie Karlsson CEO and Founder of Family Business Network Sweden
FBUK Issue 4 24
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