• Media type: E-Article
  • Title: Inheritance tax: Limit corporate privileges and spread tax burden
  • Contributor: Bach, Stefan [Author]
  • Published: Berlin: Deutsches Institut für Wirtschaftsforschung (DIW), 2015
  • Language: English
  • ISSN: 2192-7219
  • Keywords: H24 ; inheritance and gift taxation ; top wealth distribution ; D31 ; L26 ; family firm succession
  • Origination:
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  • Description: After the inheritance tax ruling by the German Federal Constitutional Court, legislators will have to limit the wide-ranging exemptions on company assets. In recent years, they have exempted half of all assets subject to inheritance tax. In particular, large transfers consisting mainly of corporate assets benefit from the favorable conditions. In 2012 and 2013, over half of all transfers of five million euros or more were tax exempt, and over 90 percent of transfers of 20 million euros or more. Revoking these company privileges would increase annual inheritance tax revenue from the current five billion euros to 13 billion euros in the medium term at present tax rates. The extensive exemption regulations are not required in larger companies to prevent job losses in the event of business succession and are sometimes even counterproductive. Allowances or deductions should be limited to required operating assets and be offset against other transferred assets or against the assets of the beneficiary. Tax burdens on corporate assets should be deferred or annuitized with no specific conditions over long periods in order to allow the corporate successor to pay them off using current revenues. Furthermore, other liabilities could be given priority over the tax claim or it could be pegged to the commercial success of the company. This would avoid complicated means testing. In addition, further tax benefits should be reduced or revoked, such as tax exemption of the family home or tax exemption for donations.
  • Access State: Open Access