Essays on Taxation and Entrepreneurship

This thesis examines the long-term tax incentives for Swedish entrepreneurs, using active owners of closely held corporations as a proxy for entrepreneurship. A general analytical framework is developed by extending the King and Fullerton (1984) model to calculate marginal effective tax rates on capital income (METRs) under detailed income-splitting and ownership rules. The thesis consists of four self-contained essays. The first essay revisits the taxation of closely held corporations in a dual income tax system. It shows that METRs for active owners are highly sensitive to remuneration strategies, financing choices, firm characteristics, and opportunities for income shifting. Even investments with identical pre-tax returns may face tax wedges that differ by several tens of percentage points, implying substantial distortions. The second essay documents the evolution of capital income taxation for active owners following the 1991 tax reform. It demonstrates that the tax system remains non-neutral, unstable, and difficult to predict, with large differences in effective taxation across sources of finance, profit levels, and owner incomes.