Wealth Tax Enforcement in Sweden: Filing Requirements and Pre-Populated Returns

This paper shows that two features of wealth tax administration in Sweden—(1) filing requirements and (2) pre-populated returns—have a large impact on compliance even in an environment with highly-developed third-party reporting through information returns, challenging the conventional wisdom that third-party information returns are a silver bullet for successful tax enforcement. Up to 1993, everybody had to fill in wealth information when filing the (joint) income and wealth tax return. In 1994-1996, only those with net wealth above the exemption threshold (approximately the top 10%) needed to fill in wealth information. This leads to a very large reduction of about half of the number of taxpayers slightly above the wealth tax exemption threshold, and a reduction of about 20% of the total number of wealth taxpayers above the threshold. Starting in 1997, Sweden began pre-populating wealth information on tax returns for taxpayers with third-party-reported net wealth above the exemption threshold. Symmetrically, this immediately doubles the number of taxpayers slightly above the threshold and increases the number of all wealth taxpayers by almost 20%. We also show that the introduction of information returns for financial wealth in 1986 had a comparatively small impact on wealth reporting.