Analysis of the Swedish Tax Agency's Proposal on Exit Taxation (Swedish Private Equity & Venture Capital Association (SVCA))

Summary

• Skatteverket estimated that the proposed exit tax would increase annual Swedish tax revenues by around 1 billion kronor starting 1 January 2020.p.2
• PwC's analysis shows that tax revenue from the proposal is projected to average only 0.56 billion kronor per year during the first 10 years (2020-2029).p.3
• An estimated 1,000 to 2,000 taxpayers relocating per year have net gains above the threshold, with unrealized gains total around 4 billion kronor annually.p.2
• Total annual gains for affected individuals averaged 4.18 billion kronor between 2014 and 2016, but varied significantly, increasing by 114% between 2015 and 2016.p.3
• The top 50 individual taxpayers in Sweden paid an average final tax of SEK 88 million in 2015, meaning early relocation of just 12 individuals reduces tax revenues by 1 billion kronor.p.5
• If 12 major taxpayers leave Sweden 10 years earlier due to the tax, the cumulative net revenue impact would be negative by approximately 5 billion kronor over 10 years.p.5

Key insights

1. Skatteverket's public statement that the exit tax yields 1 billion kronor annually is misleading as actual revenues over the first 10 years will be substantially lower.p.2
2. Average tax revenues under the proposal are projected at 0.56 billion kronor per year for 2020-2029, almost half the communicated figure.p.3
3. Revenue estimates rely on a short three-year sample period (2014-2016) during an economic boom, creating substantial long-term uncertainty.p.3
4. Capital gain estimates exhibit severe volatility, swinging by 114% between 2015 and 2016.p.3
5. Revenue estimations are dominated by isolated individual cases, shown by a 768% increase in capital gains among the top 5 taxpayers from 2015 to 2016.p.4
6. The tax agency's study fails to incorporate behavioral responses, such as high taxpayers moving abroad before the rule takes effect.p.4
7. If only 12 out of Sweden's top 50 taxpayers relocate early, the total expected 1 billion kronor annual tax revenue gain is completely negated.p.5
8. Under a scenario of early taxpayer departure, the proposal causes a net tax deficit of approximately 5 billion kronor over the first ten years.p.5