14.05.2021. OECD urges higher inheritance taxes in wake of pandemic

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Inheritance taxes are too small a proportion of many governments’ revenues and need to rise in the wake of the Covid pandemic, according to a new May report by the Organisation for Economic Cooperation and Development (OECD).
The report, called ‘Inheritance Taxation in OECD Countries’, compared inheritance, estate and gift taxes across the 37-member OECD, and explored the potential role these taxes could play in raising revenues, addressing inequalities and improving efficiency of future tax systems.
It found that on average, the inheritances and gifts reported by the wealthiest households (top 20%) are close to 50 times higher than those reported by the poorest households (bottom 20%).
Pointing out that inheritance taxes, particularly those that target relatively high levels of wealth transfers, can reduce wealth concentration and enhance equality of opportunity, it also noted that inheritance taxes generally generate lower efficiency costs than other taxes on the wealthy, and easier to assess and collect than other forms of wealth taxation.
A majority (24) of OECD countries currently levy inheritance or estate taxes, but only 0.5% of total tax revenues were sourced from inheritance, estate and gift taxes on average across the countries that levied them.
Generous tax exemptions and other forms of relief were a key factor limiting revenue from these taxes, according to the report.
In a number of countries, inheritance and estate taxes could also largely be avoided through in-life gifts, due to their more favourable tax treatment.
This reduced the number of wealth transfers that are subject to taxation, sometimes significantly so.
Across eight countries with available data, the share of estates subject to inheritance taxes was lowest in the United States -0.2% and the United Kingdom -3.9% and was highest in Switzerland -12.7%, Canton of Zurich, and Belgium -48%, Brussels-Capital region.
The report highlighted the wide variation in inheritance tax design across countries, with the level of wealth that parents could transfer to their children tax-free ranging from close to $17,000 in Belgium to more than $11m in the United States.
The OECD will be undertaking new work in that area, in particular as the progress made on international tax transparency and the exchange of information is giving countries a unique opportunity to revisit personal capital taxation.