Inheritance Taxation in OECD Countries - Webinar 12 May 2021
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Inheritance Taxation in OECD Countries Webinar • 12 May 2021
Introduction
• Purpose of the report
– Compare and assess inheritance, estate and gift taxes across OECD countries
– Explore the role that these taxes could play in raising revenue, addressing
inequalities and improving the efficiency of tax systems
• Broader work stream on capital taxation at the OECD
– Taxation of Household Savings (2018), The Role and Design of Net Wealth Taxes
(2018), “Measuring the Effective Taxation of Housing” (forthcoming)
• Project financed by the Korea Institute of Public Finance (KIPF)
2
Structure of the report
Chapter 1. Household wealth and inheritances
Chapter 2. Review of the arguments for and against
inheritance taxation
Chapter 3. Inheritance, estate, and gift tax design in
OECD countries
Chapter 4. Summary and recommendations
3
The distribution of wealth is highly unequal
Share of total net household wealth held by the top 10% and top 1% of the wealth distribution
On average across OECD countries,
52% of the total wealth is held by
the wealthiest 10%
Source: OECD Wealth Distribution Database, oe.cd/wealth.
4
Inheritances are unequally distributed, benefitting
wealthier households more
Average value of inheritances and significant gifts received across the wealth distribution
First quintile Second quintile Third quintile Fourth quintile Fifth quintile
Austria Belgium Canada Estonia
500,000
300,000
100,000
Inheritances and gifts received, USD 2015
France Germany Greece Hungary
500,000
300,000
100,000
Ireland Italy Latvia Luxembourg
500,000
300,000
100,000
Portugal Slovak Republic Slovenia Spain
500,000
300,000
100,000
Source: OECD Wealth Distribution Database, oe.cd/wealth, Balestra and Tonkin (2018). 5
Inheritances are a growing share of private wealth
Cumulated stock of inherited wealth as a fraction of private wealth, 1990-2010, selected countries
80%
Stock of inherited wealth / private wealth
USA
60%
GBR
FRA
DEU
40%
SWE
20%
00
25
50
75
00
25
19
19
19
19
20
20
Note: Data for the United States are the unweighted average of benchmark and high-gift estimates
Source: Alvaredo, Garbinti, and Piketty (2017) 6
There are many arguments in favour of inheritance and
gift taxation
• Enhances equality of opportunity
• Reduces wealth inequality, especially in the long run and if revenues
are redistributed, and can prevent the build-up of dynastic wealth
• Encourages recipients to work harder and save more
• Encourages charitable giving
• Negative externalities from wealth concentration may strengthen the case for
inheritance taxation
• Administrative advantages over other forms of wealth taxation
7
Arguments against inheritance taxes are often not confirmed
empirically and some can be addressed through better design
• May discourage donors’ from working and saving, but empirical evidence shows
limited effects
• Generally limited migration responses, except for the very top of the wealth
distribution
• May negatively affect entrepreneurship and family business successions, but
empirical findings are mixed
• Significant inheritance and gift tax planning, but this is largely the result of tax
design
• Could lead to double taxation, but this argument is weak, especially in the case
of a recipient based IHT
8
24 of 37 OECD countries levy an inheritance or an estate tax
Type of tax Country*
Belgium, Chile, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Inheritance tax and gift tax Japan, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Slovenia, Spain,
Switzerland, Turkey
Estate tax and gift tax Denmark, Korea, United Kingdom, United States
Gifts taxed under personal
Latvia (no inheritance tax), Lithuania (with a separate inheritance tax)
income tax
Australia (1979), Austria (2008), Canada (1972), Czech Republic (2014),
Repealed inheritance or estate
Israel (1980), Mexico (1961), New Zealand (1992), Norway (2014), Slovak Republic
taxes (repeal year in brackets)
(2004), Sweden (2004)
* Colombia is not included as it became a member of the OECD after the data collection exercise was completed. Information for
Belgium refers to the Brussels-Capital Region and for Switzerland refers to the Canton of Zurich, but inheritance taxes apply in other
regions and cantons. 9
Inheritance, estate and gift taxes typically raise little revenue
Inheritance, estate and gift tax revenues, 24 OECD countries, 2019
1.5
% total tax revenue
Only 0.5% of total tax revenues are
sourced from inheritance, estate and
gift taxes on average across the OECD
1.0 countries that levy them
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Note: Data are for 2018 for Greece and Japan.
Source: OECD Revenue Statistics 10Tax exemption thresholds often favour close relatives
but differ widely across countries
Tax exemption thresholds for donor's children, USD
Spouses are often exempt or benefit from the
12,000,000
highest tax exemption thresholds
USD 2020
Children typically benefit from the highest tax
9,000,000 Across countries, tax exemption
exemption thresholds after spouses thresholds for transfers to children
range from USD 17 000 to more
Much less favourable tax treatment often applies to than USD 11 million
6,000,000
transfers to distant relatives and non-related heirs
There is a case for exempting small transfers and
3,000,000
exempting transfers to spouses
Exempting large transfers to other family members
0
may reduce revenue potential and have negative
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11Certain assets benefit from preferential tax treatment
under inheritance or estate taxes
Full or partial exemptions, generous
valuation rules, lower tax rates and
payment deferrals apply to some assets
Preferential tax treatment is typically
conditional (e.g. heirs must continue
running the family business or continue
residing in the main residence)
Preferential tax treatment may
sometimes be justified, but it limits
revenue, creates distortions and
reduces progressivity
12Inheritance and estate taxes apply to a minority of
estates in a number of countries
Share of estates subject to inheritance or estate taxes, select countries
* Brussels-Capital Region; ** Canton of Zurich
This figures includes OECD countries with available data and relates to the share of estates that are subject to inheritance or estate taxes, not the share
of wealth that is taxed.
13Tax rates are generally progressive, and vary depending
on the relationship with the donor
Minimum and maximum inheritance and estate tax rates
Children Non-related parties
Japan Belgium
Korea France
Japan
France Korea
Germany Germany
United States United States
United Kingdom
United Kingdom Netherlands
Spain Greece
Ireland Slovenia While a majority of
Denmark
Belgium Chile countries apply progressive
Chile Spain tax rates, one-third apply
Netherlands Ireland flat rates, and tax rate
Finland levels vary widely
Finland Poland
Denmark Hungary
Greece Portugal
Lithuania
Italy Italy
0%
0%
%
%
%
%
%
%
%
%
20
40
60
80
20
40
60
80
Minimum and maximum statutory tax rate
14Effective tax rates are significantly lower than statutory
tax rates and in some cases decline for the largest estates
Effective tax rates across wealth groups or estates, select countries
Chile Italy Lithuania
Effective tax rate
Weath decile Wealth quintile Wealth decile
0.4% 4.0%
7.5% 0.3% 3.0%
5.0% 2.0%
Effectived tax rate
0.2%
2.5% 0.1% 1.0%
0.0% 0.0% 0.0%
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United Kingdom United Kingdom United States United States
Net estate value Gross estate for tax purposes
GBP million USD million
20.0%
15.0% 10.0%
10.0% 5.0%
5.0%
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15The design of gift taxes varies, but often leaves scope
to minimise tax liability
• The alignment between gift taxes and inheritance/estate taxes varies
across countries
• In-kind gifts are taxed in a minority of countries, but may be exempt if they
relate to special expenses (e.g. education) or occasions (e.g. birthdays)
• Gift tax exemptions are often renewed on a periodic basis
– This may allow significant amounts of tax-free wealth transfers over time
– This benefits primarily wealthy donors with liquid wealth
16Tax avoidance and evasion limit revenue potential,
efficiency and fairness
Opportunities for tax planning and Tax evasion ranges from simple
avoidance may arise from the cash transfers to sophisticated
design of wealth transfer taxes offshore structures
• Renewal of gift tax exemption thresholds
• Transfers of difficult-to-trace assets
• Favouring beneficiaries or assets that
receive preferential tax treatment • Failure to declare transfers
• Bequeathing unrealised capital gains • Abuse of debt and deduction provisions
• Use of special structures, including trusts • Concealing assets offshore (more difficult
• Taking advantage of preferential valuation with expansion of Exchange of Information
rules (EOI) networks)
17Conclusions and recommendations
• Taxing inheritances and gifts can play an important role in enhancing equality of opportunity
and reducing wealth gaps.
• There is a good case for a well-designed, recipient-based inheritance tax with an exemption
for low-value inheritances.
• Instead of taxing each wealth transfer separately, a tax on lifetime wealth transfers would
improve equity and reduce tax avoidance, but could increase complexity.
• Country context is key to assessing the need for and adequate design of wealth transfer
taxes.
• Inheritance taxation is not a silver bullet. Complementary reforms are needed, in particular
well-designed taxes on personal capital income, including capital gains.
18Additional recommendations
• Exempt small inheritances
• Implement progressive tax rates to enhance vertical equity
• Avoid excessive gaps between the tax treatment of direct descendants and other heirs
• Better align the taxation of inheritances and gifts
• Scale back tax reliefs for which there is no strong rationale and which tend to be regressive
• Carefully consider and design relief for business assets
• Carefully assess and limit possibilities for tax planning (e.g. through trusts, charitable
bequests, separating bare ownership/usufruct, preferential valuation rules)
• Allow tax to be paid in instalments or deferred, under certain conditions
• Prevent unrealised capital gains at death from fully escaping taxation
• Better align taxing rights in respect of cross-border inheritances across countries and provide
adequate double tax relief
19Further reading
Full report in English Summary of key findings in Résumé des conclusions
French version available soon English principales en français
http://oe.cd/inheritancetax
https://bit.ly/3vQE6CC https://bit.ly/2RGDzVh
http://oe.cd/impotsuccessions
20Contact us
ctp.contact@oecd.org
http://oe.cd/inheritancetax
@OECDtax OECD Tax #InheritanceTax
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