OECD targets inheritance and inheritance rights

The OECD identifies inheritance tax as an important tool to tackle wealth inequality, especially in the current context of public finance difficulties caused by the COVID-19 pandemic, in a new report published on Tuesday.

Inheritance tax in OECD countries provides insight into inheritance, inheritance, and gift taxes in the 37-member organization, and explores the role these taxes could play in increasing income, addressing inequality, and improving efficiency tax systems in the future.

The report highlights both the high level of wealth concentration in OECD countries and the unequal distribution of wealth transfers, which further reinforces inequalities.

On average, the inheritances and gifts declared by the richest 20% of households are almost 50 times higher than those declared by the poorest 20% of the poorest households.

The report argues that inheritance taxes, especially those that target relatively high-value transfers of wealth, can reduce the concentration of wealth and enhance equality of opportunity.

He also notes that inheritance taxes have been found to generally incur lower efficiency costs than other taxes on the wealthy and are easier to assess and collect than other forms of taxation. wealth tax.

“While the majority of OECD countries levy inheritance and inheritance taxes, they play a more limited role than they might in raising revenue and tackling inequality, due to the way which they were designed,” said Pascal Saint-Amans, Director of the OECD Centre. for tax policy and administration.

“There are strong arguments for the increased use of inheritance taxes, but better design will be needed if these taxes are to achieve their objectives.”

A majority of OECD countries, 24 out of 37, currently collect inheritance or inheritance tax. But these taxes generally generate very little revenue. Only 0.5% of total tax revenue comes on average from inheritance, inheritance and gift taxes in the countries that levy them.

Indeed, tax exemptions and other forms of tax relief, which primarily benefit wealthier households, reduce the effective escalation of inheritance and inheritance taxes, the report notes.

Due to the high exemption thresholds, individuals are often able to pass on large amounts of wealth to their relatives tax-free.

Tax relief is also common for transfers of specific assets such as primary residence, business and agricultural assets, retirement assets and life insurance policies.

In a number of countries, inheritance and inheritance tax can also be largely avoided through inter vivos gifts, due to their more favorable tax treatment.

The report shows the wide range of inheritance tax models across countries. The level of wealth that parents can transfer to their children tax-free ranges from nearly US$17,000 in Belgium to over US$11 million in the United States.

Tax rates also differ from country to country, with the majority applying progressive tax rates and a third of countries using flat rates.

As a result, there are significant differences in the extent to which wealth transfers are taxed. Across eight countries with data, the report found that the share of estates subject to inheritance tax was lowest in the US (0.2%) and the UK (3.9%) while it was highest in Switzerland (12.7%) and Belgium (48%).

The OECD report proposes a number of reforms to increase the revenue potential, efficiency and fairness of inheritance, inheritance and gift taxes.

An inheritance tax levied on the value of the assets that the beneficiaries receive, with an exemption for low value inheritances, would be fairer. And levying a lifetime inheritance tax would be fairer with less opportunity for tax avoidance, the report says. But he acknowledged it would increase administrative and compliance costs.

Other policy priorities should include reducing regressive tax breaks, better aligned tax treatment of gifts and inheritances, and measures to prevent avoidance and fraud.

To make these taxes more palatable to the general public, the report says, there is a need to provide citizens with information about inequalities and how inheritance and inheritance taxes work, as these tend to be misunderstood.

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