Tax avoidance and state ownership — The case of Sweden

We propose a simple theoretical model for how a company with both private and state shareholders decides on its optimal tax policy. The model predicts that even in the absence of state shareholding, a company will not always pick a tax policy that minimizes taxes. Conversely, majority state ownership will generally not result in zero tax avoidance. Using panel regressions on the entire population of state-owned as well as publicly listed Swedish companies from 2000–2019, we find that a one standard deviation increase in state ownership increases corporate tax payments by around 14%.