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Inheritance tax regimes: a comparison*
Stefan Jestl** 
Article | Year: 2021 | Pages: 363 - 385 | Volume: 45 | Issue: 3 Received: September 7, 2020 | Accepted: March 3, 2021 | Published online: September 6, 2021
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
Source: European Commission, DG Taxation and Customs Union, based on Eurostat data; own calculation and illustration.
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Inheritance tax (in a narrow sense)
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Estate tax
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DE, DK2), NL, FI, FR, IT
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DK2), UK, USA1)
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Note: 1) The US applies an estate tax at the federal level. At the level of individual states, we however find both systems, estate and inheritance tax systems. In our analysis of the US regime we however only consider the federal estate tax. 2) Denmark applies both systems: an estate tax is combined with an inheritance tax (see more details below). Source: Nass-Schmidt, et al. (2011) & EY (2015); own illustration.
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Country
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Determinants of tax rates
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IT, DK
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Relationship between persons
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US
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Value of (total) inherited assets
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DE, NL, FI, FR
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Relationship between persons & value of inherited assets
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UK
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None (flat rate)
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Note: Tax exemptions and reliefs are not considered in the determinants (see below). Source: EY (2015; 2016; 2020); own illustration.
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Country
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Class assignments
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Germany
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I: close relatives1) (incl.
grand-/stepchildren), II: wider family (incl. siblings), III: others
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Italy
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I: close relatives (incl. grandchildren), II:
siblings, III: other relatives (stepchildren), IV: others
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Netherlands
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I: close relatives, II: grandchildren, III: others
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United Kingdom
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-
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Finland
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I: close relatives (incl. grand-/stepchildren), II:
all other cases
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United States
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-
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France
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I: ascendants and descendants, II: siblings, III:
blood relatives (up to fourth degree), IV: others
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Denmark
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I: close relatives, II: others
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Note: 1) close relatives comprise spouses (partner) and children. Source: EY (2015; 2016; 2020); own illustration.
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Country
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Tax rates
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Germany
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Tax classes with different
progressivity – I: 7-30%, II: 15%-43%, III: 30-50%
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Italy1)
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Tax classes with fixed rates – I:
4%, II: 6%, III: 6%, IV: 8%
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Netherlands
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Tax classes with different
progressivity – I: 10%-20%, II: 18%-36%, III: 30%-40%
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United Kingdom2)
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40%
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Finland
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Tax classes with different
progressivity – I: 7-19%, II: 19-33%
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United States
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Class with progressivity – 18-40%
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France
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Tax classes with different
progressivity – I: 5-45%, II: 35-45%, III: 55%, IV: 60%
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Denmark
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Tax classes with fixed rates – I:
15%, II: 36.25%
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Notes: 1) Class II contains tax-free amount tax, whereas class III does not have it. - 2) The tax rate can be re-duced in case of leaving 10% of estate to charity. Source: EY (2015; 2016; 2020); own illustration.
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Country
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Exemptions
and reliefs
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Germany
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Different tax-free amounts within classes depending
on degree of kinship, decreasing tax-free amounts across classes, family home
for spouse as well as children and stepchildren
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Netherlands
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Different tax-free amounts depending on degree of
kinship, special exemptions for disabled persons and the state
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United Kingdom
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Uniform tax-free amount additional tax-free amount
for close family members transfer to spouse/civil partner is tax-free
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Finland
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Exemptions for the state and its institutions,
special public employees (e.g. diplomats), exemption for spouse possible
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United States
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High tax-free amount, unlimited deduction for
spouses that are US citizens, deduction for non-US citizen spouse limited.
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France
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Different tax-free amount across tax classes, transfer
to spouse is tax-free
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Denmark
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Exemption for transfers to spouse or an organisation
of public utility as well as state.
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Italy
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Different tax-free amounts across classes, no
tax-exempt threshold for other relatives (stepchildren) and others (III &
IV), special exemptions for disabled persons
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Source: OECD database, own illustration.
Source: World Wealth and Income Database (WID), own illustration.
Source: World Wealth and Income Database (WID) & OECD database, own illustration.
Figure 1Share of inheritance taxes (as % of total taxation), 1995-2018 DISPLAY Figure
Table 1Inheritance and estate taxes DISPLAY Table
Table 2Tax rate design DISPLAY Table
Table 3Tax classes DISPLAY Table
Table 4Tax rate groups DISPLAY Table
Table 5General exemptions and reliefs DISPLAY Table
Figure 2Inheritance and estate tax revenues (as % of GDP) in FI, NL, DE, FR, US and UK, 1965-2010 DISPLAY Figure
Figure 3Net private wealth to net national income ratio, 1955-2015 DISPLAY Figure
Figure 4Wealth-income ratio versus inheritance tax revenue (as % of GDP), 1965-2015 DISPLAY Figure
** The author would like to thank two anonymous reviewers; Sebastian Leitner; Mario Holzner (wiiw); Miriam Rehm (University of Duisburg-Essen), Matthias Schnetzer (AK) and others for their very helpful comments and suggestions.
1 For instance, a double progressivity in tax rates in Germany and the Netherlands; single progressivity in tax rates in the United States and a flat tax in the United Kingdom.
2 The unified tax credit was increased from USD 5 million to USD 11 million under President Donald Trump.
3 From a theoretical point of view, in case of a completely foreseen inheritance the behaviour has already been adjusted before the inheritance is actually received.
4 Doorley and Pestel (  2020) find strong adverse labour market effects for households that received an inher-itance and did not have children using German data.
5 There are also studies that find a less important role of inheritances for wealth accumulation (for instance, see Beznoska, Niehues and Stockhausen, 2018).
6 The equalising effect of inherited wealth is also supported by findings of Elinder, Erixson and Waldenström ( 2018), Boserup, Kopczuk and Kreiner ( 2016) and Wolff and Gittleman ( 2014).
7 Sweden abolished the taxation of inherited wealth in 2004. Inheritance taxes in Sweden depend on the rela-tionship between the deceased and the heir as well as the value of the inherited wealth (for more details see Henrekson and Waldenström, 2016).
8 For the US, we consider the inheritance and estate tax as well as the gift tax revenues combined.
9 Due to data limitations, we cannot show graphs for Italy, Denmark, Finland and the Netherlands.
10 Here, the implicit assumption is that the wealth distribution across age cohorts is similar across countries. This implies that the probability of observing an inheritance is also similar across countries.
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September, 2021
III/2021 |
