Calls have been made for the UK to follow in Sweden’s footsteps through growing its economy by abolishing inheritance tax.
Inheritance tax, which had existed in Sweden since the 17th century, was abolished in 2004 due to a bill supported by the Social Democrats, the Green Party and the Left Party.
This popular decision received widespread acclaim and resulted in the implementation of a Smarter tax system which led to the tax ratio declining from 51 percent of GDP in 2000 to 44 percent in 2014 while tax income increased by SEK 260billion, adjusted for inflation.
Swedish tax policy, including inheritance tax, initially led prominent entrepreneurs to emigrate out including IKEA founder Ingvar Kamprad who ultimately returned once the taxes were abolished.
The abolition of the tax also led to a heavily reduced burden on the Swedish Tax Authority which lowered governmental need to invest in the area.
During the third day of debate on Jeremy Hunt’s Spring Budget, Ranil Jayawardena, MP for North East Hampshire, said that Sweden’s abolition of inheritance tax led to increased tax revenue.
Mr Jayawardena told the House of Commons in Westminster: “Abolishing inheritance tax will grow the economy, it would encourage more people to stay and work for longer and it will boost receipts to the Exchequer, and the proof of this is Sweden.
“Sweden’s inheritance tax has raised roughly the same proportion as it does in this country, less than one percent of all revenue to the Treasury.”
Mr Jayawardena said that the abolition of the tax resulted in booming entrepreneurship, economic growth and tax revenues that that tax had previously suppressed.
He said: “It created a surge in assets actually being transferred, not just between family members but to external owners. It was invested in business, capital was being used for innovative reasons and productive uses, and family businesses became more entrepreneurial too, so it was a win-win.
“So, contrary to some briefing that there was from the Treasury ahead of this budget, by abolishing inheritance tax, or at least cutting it significantly, the overall tax revenues can go up and the proof is there. And, of course, any action on inheritance tax is non-inflationary which makes it a safe choice as we continue to battle inflation.”
Inheritance tax is applied to estates valued at £325,000 or more, with this threshold increasing to £500,000 for direct descendants of the deceased, such as their children.
