Beautiful European country’s surge of the super-rich – despite famously high tax rates | Personal Finance | Finance

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Sweden has earned a global reputation for its high taxes, but it has now become a European hotspot for the super-rich.

 

In 1996, there were just 28 people with a net worth of a billion kronor or more (around $91m or £73m at today’s exchange rate).

 

Today, there are more than 542 and between them they own wealth equivalent to 70 percent of the nation’s total economic output.

 

Sweden – with a population of just 10 million putting it on a par with London – also has one of the world’s highest proportions of “dollar billionaires” per capita. Forbes listed 43 Swedes worth $1bn or more, putting it way ahead of Britain – at a total of 55 – in terms of billionaires per head of population.

 

Sweden had very low interest rates from the early 2010s until a couple of years ago which made it cheap to borrow money.

People with cash to spare often chose to invest in property, or high risk investments like tech start-ups, many of which shot up in value as a result.

 

The country has a reputation as the Silicon Valley of Europe, having produced more than 40 so-called unicorn start-ups – companies worth more than $1bn – in the past two decades.

 

Skype and Spotify were founded there, as well as gaming firms King and Mojang.

 

More recent global success stories include the financial tech start-up Tink, which Visa acquired for around $2bn during the pandemic, the healthcare company Kry, and Voi, which is an e-scooter company.

 

Although a right-wing coalition is currently in power, the nation has been run by Social Democrat-led governments for the majority of the last century, elected on promises to grow the economy in an equitable way, with taxes funding a strong welfare state.

 

Andreas Cervenka, a journalist at Aftonbladet, and author of the book Greedy Sweden, told the BBC the change has created a start divide between rich and poor.

 

“This has come about in a sort of a stealthy way – that you haven’t really noticed it until after it happened,” he said.

 

“But in Stockholm, you can see the wealth with your own eyes, and the contrast between super rich people in some areas of Stockholm and quite poor people in other parts.”

Although top earners in Sweden are taxed more than 50 percent of their personal incomes – one of the highest rates in Europe – successive governments – on the right and left – have adjusted some taxes in a way that favours the rich.

 

For example, the country scrapped wealth and inheritance taxes in the 2000s, and tax rates on money made from stocks.

 

At the same time, tax rates pay outs to company shareholders are much lower than taxes on salaries.

 

Separately, the corporate tax rate has also dropped from around 30 percent in the 1990s to around 20 percent, which compares to 25 percent in the UK and is slightly lower than the European average.

 

Mr Cervenka said: “You don’t have to move out of Sweden if you’re a billionaire today. And actually, some billionaires are moving here.

 

At Epicenter – a shared office and community space with a giant glass atrium – veteran entrepreneur Ola Ahlvarsson traces this success back to the 1990s.

 

He said a tax rebate on home computers in Sweden “wired or connected all of us much faster than other countries”.

 

A serial co-founder himself, he also points to a strong “culture of collaboration” in the start-up scene, with accomplished entrepreneurs often becoming role models for – and investors in – the next generation of tech companies.

 

Sweden’s size makes it a popular test market, too. He added: “If you want to see if it works on a larger market, you can – at limited cost and without too much risk for your brand or for your stock price – try things here.”

Serial entrepreneur Konrad Bergström said Sweden has “a very favourable tax system if you are building companies”.

 

However he says his wealth has a positive impact because his businesses – and homes – provide employment for others.

 

“We have a nanny and we have a gardener and cleaners… and that also gives more jobs. So we shouldn’t forget about how we’re building the society,” he said.

 

Mr Bergström points out that wealthy Swedish entrepreneurs and venture capitalists are also increasingly reinvesting their money in so-called “impact” start-ups, which have a focus on improving society or the environment.

 

The approach has many echoes of the way the entrepreneurs in Britain during the industrial revolution harnessed much of their wealth to invest in the ‘public good’.

 

In 2023, 74 percent of all venture capital funding to Swedish start-ups went to impact companies. This the highest percentage in the EU, and far above the European average of 35 percent, according to figures from Dealroom, which maps data on start-ups.

 

Perhaps the country’s most high profile impact investor is Niklas Adalberth, who co-founded the unicorn payments platform Klarna. In 2017, he used $130m of his fortune to launch the Norrsken Foundation, an organisation that supports and invests in impact companies.

 

He said: “I don’t have the habits of a billionaire in terms of having a yacht or a private jet or anything like that. This is my recipe for happiness.”

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