Equal taxation as a basis for classifying financial instruments as debt or equity - a Swedish case study
Author
Summary, in English
This article examines the way in which classification of financial instruments as debt or equity has developed in the Swedish income taxation system over the past 25 years. Although the structure of the tax system is based on the assumption that debt instruments are financial instruments with low risk, legal developments have not shared that assumption, resulting in several types of high-risk derivative instruments being covered by the definition of legal debt. This article illustrates how those developments, which can be recognized in most income-tax systems within OECD countries, seriously threatens the fundament of the tax system: equal taxation for capital income and income from labor. The article concludes by illustrating how the standard solution to the problem of classifying financial instruments as debt and equity – by treating them alike – does not fulfill the challenged principle of equal taxation, but actually intensifies the development towards unequal taxation.
Publishing year
2015
Language
English
Pages
677-715
Publication/Series
eJournal of Tax Research
Volume
13
Issue
3
Full text
- Available as PDF - 449 kB
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Links
Document type
Journal article
Publisher
University of New South Wales. School of Taxation & Business Law
Topic
- Law and Society
- Business Administration
Keywords
- Debt
- Equity
- Derivatives
- Income tax
- Flat tax
- Financial theory
- Swedish tax law
- Horizontal equity
Status
Published
Project
- Tolkning av skatterätt
Research group
- Knut Wicksell Centre for Financial Studies
ISBN/ISSN/Other
- ISSN: 1448-2398