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Taxes, frictions and asset shifting: when Swedes disinherited themselves

Sebastian Escobar (), Henry Ohlsson () and Håkan Selin ()
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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, https://www.ifau.se/sv/Om-IFAU/Medarbetare/Forskare-Utredare/Hakan-Selin/

No 2019:6, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

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 (search for similar items in EconPapers)
JEL-codes: H21 H24 H26 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2019-03-22
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:ifauwp:2019_006

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