Exodus of Millionaires : Sweden May Cut Inheritance Tax

With multimillionaires moving their families to other countries, Swedes are reconsidering the structure of inheritance taxes, which can run as high as 70%.

An announcement by the 34-year-old billionaire industrialist Fredrik Lundberg that he was moving to Switzerland set off debate in the country about the tax on inheritances.

“It’s my and my family’s wish to secure the control of the company within the family in case I die,” Lundberg was quoted as saying in a newspaper interview.

When the inheritance tax and the capital gains tax are combined, the result sometimes can be a 100% tax for the heirs of the owner of a large company.

A survey taken after Lundberg’s announcement by the private polling institute Sifo indicated that three out of four Swedes felt inheritance taxes should be cut to 25% or 30%.

Of the 1,029 Swedes surveyed, 74% thought Sweden’s inheritance taxes were unreasonably higher than other countries. Eleven percent found the rates reasonable and 14% said they had no opinion.

“If you ask people if they want lower taxes, of course they answer ‘yes’ ,” Claes Ljungh, an official at the Ministry of Finance, said in an interview with the Associated Press.

“When you discuss taxes in Sweden, I think you must consider the whole system. Actually, our corporate taxes are very industry-friendly and it is highly possible to become very rich in Sweden in just a short period.”

A government panel, however, is investigating possible changes in inheritance taxation.

When a Swede leaves an inheritance of 6 million kronor ($770,000) or more, taxation goes as high as 70%.

Capital Gains

If the heirs sell stocks left to them to pay inheritance taxes, they then have to pay an additional 24% capital gains tax on the returns from the sale.

For inheritance purposes, the stocks are valued according to their price on the stock market the day their owner died.

But since stock prices generally fall when large blocks are sold, the heirs of big shareholders can find themselves with stock worth less in the market than it is on the tax books. In some cases, this system has driven inherited estates into bankruptcy.

Ljungh of the Finance Ministry said the government panel will propose a change in the capital gains tax on stocks sold to pay inheritance taxes, but no details have been disclosed.

In the debate following Lundberg’s decision to leave Sweden, some non-socialist politicians discussed a lowering of Sweden’s inheritance taxes to the level of other Nordic countries.

In Denmark, the maximum tax is 32%, in Norway 25% and in Finland 14%.

Other prominent businessmen who have left Sweden because of the inheritance taxes are Ingvar Kamprad, owner of the European-wide furnishings company Ikea, who moved to Denmark in 1973, and the Rausing family, owner of the packing company Tetra Pak, who went to Italy two years earlier.

Bjorn Borg, the former international tennis champion, established a residence in Monaco at the height of his athletic career to avoid taxes on his income. He has since moved back to Sweden, saying he would “take all consequences.”