Inheritance Taxation in the EU

The sustainability of public finances remains a challenge for EU countries. Following large budget deficits and increasing public debt after the pandemic, governments have been supporting societies, which are increasingly faced with higher costs of living, high inflation and an energy crisis. Structural problems are limiting these responses and are adding to the budgetary needs. For instance, many EU countries have an ageing society that requires sustainable pension systems and a comprehensive welfare state. This increases the fiscal burden on labour and firms who provide the finance for it. Therefore, broadening the tax base by identifying alternative sources of revenue has become a priority for governments in the EU. An important response, which remains unexplored by many countries, is the taxation of inheritance.

Taxing inheritance can contribute to additional revenue, while limiting adverse tax effects on growth and, at the same time, improving inequalities. Recent evidence suggests that asset accumulation and concentration through inheritance may result in larger amounts of wealth being transferred at the top of the wealth distribution, thus opening up the wealth inequality gap in societies. This calls for considering the pros and cons of taxing inheritances and gifts as a tool for addressing inequality. At the same time, policymakers and academics need to consider the available evidence on behavioural responses that these taxes might pose to societies and contrast them with more traditional taxes.

Inheritance taxation may also contribute to closing loopholes of tax avoidance. Wealthy individuals at the top of the income distribution make extensive use of tax planning to lower their tax liability. Inheritance taxation can compensate for the taxes avoided by acting as a safeguarding mechanism to avoidance responses. While evidence have increased in recent years on the links between inheritance, wealth inequality and tax avoidance, yet, our understanding of the interlinkages remains limited.

To address these issues, this workshop aims to provide a space for academics and policymakers to discuss the latest evidence, developments and links between inheritance taxation, inequality and tax avoidance. Furthermore, it aims to provide participants with the latest evidence in this field and to project policy forward that would help determine options for policy reforms.