Scandinavian Working Papers in Business Administration

Working Papers,
Örebro University, School of Business

No 2014:2: A 150-year Perspective on Swedish Capital Income Taxation

Gunnar Du Rietz (), Dan Johansson () and Mikael Stenkula ()
Additional contact information
Gunnar Du Rietz: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics (IFN), P.O. Box 5566, SE – 102 15 Stockholm
Dan Johansson: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Mikael Stenkula: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics (IFN), P.O. Box 5566, SE – 102 15 Stockholm

Abstract: This paper describes the evolution of capital income taxation, including corporate, dividend, interest, capital gains and wealth taxation, in Sweden between 1862 and 2010. To illustrate the evolution, we present annual time-series data on the marginal effective tax rates on capital income (METR) for a marginal investment financed with new share issues, retained earnings or debt. Tax tables covering the period are presented. These data are unique in their consistency, thoroughness and time span covered. The METR is low, is stable and does not exceed five percent until World War I, when it starts to drift somewhat upward and vary depending on the source of finance. The outbreak of World War II starts a period when the magnitude and variation of the METR sharply increases. The METR peaks during the 1970s and 1980s and often exceeds 100 percent. The 1990–1991 tax reform and lower inflation reduce the magnitude and variation of the METR. The METR varies between 15 and 40 percent at the end of the examined period.

Keywords: cost of capital; marginal effective tax rates; marginal tax wedges; tax reforms

JEL-codes: H21; H31; N44

69 pages, February 21, 2014

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