The Effects of Introducing an Exit Tax in Sweden (Swedish Private Equity & Venture Capital Association (SVCA))

Summary

• The long-term annual tax revenue expected from the proposal is overestimated by approximately SEK 160 million because it relies on a period of unusually high equity returns.p.2
• Tax revenue from the proposed exit tax is highly concentrated, with 5 emigrating individuals accounting for 68% of estimated revenue in 2016 and 32% of total revenue between 2014 and 2016.p.2
• If just 12 of the 50 highest tax-paying individuals in Sweden leave the country to avoid exit taxation, the proposal will result in a net tax revenue loss for a decade.p.2
• Top taxpayers in Sweden contribute heavily to labor income taxes, with the top 1% paying 2.7 times more in labor income tax than in capital income tax.p.5

Key insights

1. Long-term annual tax revenue is conservatively overestimated by SEK 160 million, or 16%, due to distorted baseline return assumptions.p.10
2. Emigration of just 12 of the top 50 tax-paying individuals would offset all projected gains and create a net tax revenue loss for 10 years.p.8
3. The top 1% of Swedish taxpayers accounted for 13% of total tax revenue in 2015 and paid 2.7 times more in labor income tax than capital income tax.p.5
4. Swedish Small-cap and Mid-cap indexes rose by 27% and 24% per year respectively during 2014-2016, creating an unrepresentatively high baseline for revenue projections.p.7
5. The top 10% of emigrating taxpayers account for approximately 90% of total revenue projected from the proposed exit tax.p.9