US Terminates Estate Tax Treaty With Sweden

by Mike Godfrey, Tax-News.com, Washington

19 June 2007

The US Treasury Department has announced that on June 7, 2007 the United States delivered to the Government of Sweden a notice of termination of the tax treaty between the two countries with respect to estates, inheritances, and gifts.

In accordance with the provisions of the treaty, the notice of termination provides that the treaty will cease to have effect as of January 1, 2008. At the time the treaty was signed, Sweden maintained a tax on inheritances and gifts. Sweden has since abolished this tax, and as such, the treaty is no longer needed to prevent double taxation with respect to taxes on estates, inheritances and gifts.

The abolition of these taxes marks a major step down the road towards centre-right Prime Minister Fredrik Reinfeldt's goal of liberalizing Sweden's economy by reducing taxes and the welfare state.

The coalition has talked about cutting income, corporate and property taxes by about SKR60 billion. These cuts would be financed in part by paring down unemployment and sickness benefits. The coalition has also expressed its intention to make the labour force more flexible by allowing companies to hire and fire workers more easily, and by removing certain state benefits, which it argues act as a disincentive to work.

Reinfeldt has also pledged to axe Sweden's wealth tax. Sweden remains one of only four countries in the OECD that levy such a tax on wealth, and the government has blamed the existence of the levy for contributing to high levels of capital flight and low levels of investment and entrepreneurship.

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