Evaluation of the Swedish 3:12 rules 

1. The 3:12 rules and income shifting

Project members: Annette Alstadsæter and Martin Jacob

The optimization of taxes is a never-ending cat-and-mouse game between taxpayers and tax authorities. While taxpayers try to minimize taxes through legal or illegal means, the tax authority intends to uncover tax evasion, to enforce tax rules, and to close unintended loopholes.

In a project for the Expert Group of the Swedish Ministry of Finance, we have evaluated the tax rules for closely held corporation owners. The Swedish 3:12 rules were designed to prevent income shifting and tax avoidance under the dual income tax. We document widespread tax avoidance in response to a 2006 reform of the 3:12 rules that among other things reduced the dividend tax for active owners in closly held corporations. 

Policy report

Alstadsæter, Annette and Martin Jacob: Income shifting in Sweden. -An empirical evaluation of the 3:12 rules. Report to the Expert Group on Public Economics (ESO) 2012:4, Swedish Ministry of Finance. Fritzes, Stockholm. 

Publications

Alstadsæter, Annette and Martin Jacob: Nya företagsregler har ökat skatteplanering. Feature article, Svenska Dagbladet, June 8, 2012.

Alstadsæter, Annette and Martin Jacob: 3:12 reglarna har blivit för generösa. Balans, 2012, 38(8-9), 50-51.

Alstadsæter, Annette and Martin Jacob: Dividend taxes and income shifting. FAccT Center Working Paper Nr. 07/2012.

Alstadsæter, Annette and Martin Jacob: Who participates in income shifting? FAccT Center Working Paper Nr. 08/2012.

Alstadsæter, Annette and Martin Jacob: 3:12 reglarna har blivit för generösa och används för skatteplanering. Ekonomisk debatt, 2012, 40(8), 5-12.

Alstadsæter, Annette and Martin Jacob: Skatteplanering under 3:12 reglarna - Ytterligare bevis och svar til Ericson och Fall. Ekonomisk debatt, 2013, 41(2), forthcoming. Downloadable here.