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Inheritance Tax: Spreading the Wealth

Published 16 May 2022
Reference 6748
Region Global
Summary

There is a pressing need for global reform of inheritance taxation systems. On average, only 0.5% of total tax revenues are sourced from inheritance taxes across the 24 OECD countries that levy them. If designed properly, inheritance taxes could play a greater role in raising revenues for cash-strapped authorities seeking to overcome mounting public deficits. A new equity-based approach to inheritance taxes could also prevent wealth inequality from becoming even more concentrated as the baby-boomers transfer intergenerational wealth. The case explores the challenges facing public policy makers as they seek to balance variables like tax exemption thresholds designed to ensure heirs receive a fair share of wealth tax-free, the operative word being fair. The case also explains the tools used to avoid paying a fair share of inhertance tax, such as trusts and tax havens.

Teaching objectives

The case offers an opportunity to discuss inheritance tax in the context of the intergenerational transfer of wealth that is being witnessed by most countries, notably reforms to the global inheritance taxation system from various perspectives. Across all OECD countries, 51% of total wealth is held by the wealthiest 10%, while households in the lower half of the distribution have little to no net wealth. Wealth inequality could be accentuated if wealth transfer is left largely untaxed. Indeed inheritance taxes have been repealed in 10 OECD countries. Students work in groups to discuss various measures to design inheritance taxes more effectively and reduce the incentive to avoid paying them.

Keywords
  • OECD
  • Estate Tax
  • Lee Kun Hee
  • Tax Avoidance
  • Wealth Inequality
  • Dynasty Trusts
  • Tax Loopholes
  • Inheritance Tax
  • Gift Tax
  • Thomas Piketty
  • Progressive Tax
  • Phil Knight
  • Wealth Transfer
  • Public Policy
  • Q22022
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