Scandinavian Working Papers in Economics
Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy
No 2019:6: Taxes, frictions and asset shifting: when Swedes disinherited themselves
Sebastian Escobar (), Henry Ohlsson () and Håkan Selin ()
Additional contact information
Sebastian Escobar: University of Munich, Postal: University of Munich, Research Institute for Industrial Economics
Henry Ohlsson: Uppsala University, Postal: Department of Economics, Uppsala University
Håkan Selin: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: Institute for Evaluation of Labour Market and Education Policy, P O Box 513, SE-751 20 Uppsala, Sweden
Abstract: We study tax-driven intergenerational asset shifting using a salient tax discontinuity and rich data on both donors and recipients. When the Swedish inheritance tax was in place, heirs could lower their inheritance tax bills by passing on part of the inheritance to their children. We present evidence on strong and precise responses to this incentive. We quantify optimization frictions, and we show that they are small in this setting. Both intensive and extensive margin policy responses can be rationalized by a simple model in which agents face small frictions at the extensive margin. Descriptive evidence suggests that the policy response is associated with the abundant supply of cheap legal advice on tax planning.
Keywords: tax avoidance; tax rate elasticity; inheritance taxation; inter vivos gifts
60 pages, March 22, 2019
Full text files
wp2019-06-taxes-frictions-and-asset-shifting.pdfFull text
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