Annelie Karlsson | CEO and Founder of Family | Business Network Sweden
More than 20 years ago, Sweden took a bold step and abolished inheritance and gift taxes. Annelie Karlsson, CEO and Founder of Family Business Network Sweden tells the story behind it
“I recall it vividly. My mother passed away in November 2004 and her estate transferred to my father without tax.”
As of that year, spouses could inherit without incurring inheritance tax, sparing many from the tragic consequence of having to sell their homes. The reform was a humane and pragmatic decision, led by forward-thinking Social Democratic policymakers.
Originally scheduled for full repeal on 1 Jan 2005, inheritance and gift taxes were abolished earlier on 17 Dec 2004, in response to the devastating tsunami in South East Asia, which claimed the lives of many Swedes. The expedited timeline was a compassionate gesture to ease the burden on grieving families.
Of course, Sweden’s tax landscape was not always so accommodating. When FBN Sweden was founded three decades ago, Stefan Persson, the then principal owner of H&M, faced a pivotal decision: should he keep the company’s headquarters in Sweden or not?
At an FBN board meeting, he presented letters from foreign governments competing to offer the most favourable tax conditions for growth. Swedish policymakers responded late but wisely, offering tax relief in exchange for moving the company from the main stock exchange to the OTC list. This allowed H&M to retain capital for expansion, benefiting not only the company but also Swedish pension savers and the broader welfare system.
At the same time, FBN members were engaging with policymakers on the parliamentary tax committee. One family business, which had built rental housing in central Stockholm, told them that inheritance tax payments could have financed the construction of 200 new apartments! This, it seems, prompted even the most left-leaning politicians to reconsider the tax’s unintended consequences.
The then Minister for Enterprise Ibrahim Baylan spoke at an FBN conference and explored some of these broader implications. He noted that ownership taxes diverted time and resources from strategic business development and primarily enriched tax consultants rather than the state. Tax revenues, he said, were minimal and in the worst cases, business ownership simply relocated abroad – shifting decision-making and employment beyond Sweden’s borders.
Subsequent research has confirmed the positive impact of tax reform on Sweden’s entrepreneurial ecosystem. Today, the country boasts a world-class business climate. Studies from the Research Institute of Industrial Economics show that family firms contribute significantly to productivity and resilience. They outperform non-family firms and retain more employees during downturns.
According to the National Institute of Economic Research, this translates to roughly two percentage points higher employment. Former Prime Minister Stefan Löfven and current Social Democratic leaders have acknowledged this. They have praised family businesses for sustaining the economy during the financial crisis and the COVID-19 pandemic. Despite pressure from more radical factions, they have refrained from proposing inheritance, gift, or wealth taxes in their election platform, recognising that such taxes yield little revenue, distort incentives, and undermine the foundations of welfare financing.
Senior MP Lars Mejern (Social Democrat) has encouraged family business owners to take a more active role in public discourse, emphasising their long-term perspective:
“Politicians have the longest time horizon when newly elected, then it quickly shrinks. But families think in generations, not quarters.”
The gradual abolition of inheritance and gift taxes in Sweden stands as a landmark in modern fiscal policy. Family businesses are grateful for the decision which has shaped beneficial conditions for businesses with a long-term perspective.
Together with policymakers, Swedish family business owners remain committed to building the world’s best welfare system – anchored in a resilient, world-class business sector.