The Organisation for Economic Cooperation and Development (OECD) has released a report ‘Inheritance Taxation in OECD Countries’ calling on governments to increase taxes to help readdress wealth inequality.
- The report provides a comparative assessment of inheritance taxation across OECD countries and explores the role that inheritance, estate and gift taxes could play in raising revenues, addressing inequalities and improving efficiency in the future.
- The report also says an increase in Inheritance Tax (IHT) could help nations pay for the rising cost of COVID-19.
The OECD said, "Wealth inequality has been persistently high and on the increase in many countries for decades. Wealthier households are reporting higher-value inheritances, a trend which is likely to persist as asset prices continue rising and the Baby-boom generation ages."
The report revealed that 24 of the 37 OECD countries levied an IHT but the average tax collection across those nations only amounted to 0.5% of overall revenue.
In the UK, IHT contributes only 0.8% of the taxes raised for the Treasury. This puts the UK in sixth place amongst OECD countries in raising the most from the tax.
OECD figures also show that during the 20th-century wealth inequality was falling, but over the past 20 years, many nations have seen a reversal of this trend. The OECD highlighted that the UK, the US and Germany had seen a pronounced reversal.
According to OECD figures, the top 20% of wealthy households hold 57% of all wealth in the UK. In the US the top 20% of wealthy households hold 67% of all wealth.
This compared with the OECD average of 39%.
The OECD makes several recommendations;
- Levy an IHT on a lifetime basis, on the overall amount of wealth received by beneficiaries over their lifetime through both gifts and inheritances. The OECD accepts that this system would increase administrative and compliance costs.
- Scale back regressive tax reliefs and prevent avoidance and evasion.
- Make these taxes more acceptable by the public at large.
The report has been released just as it has emerged that the family of the Samsung industrialist Lee Kun-hee has an IHT bill in excess of $12 billion since South Korea has the world's highest IHT tax rate at 60%.
Useful guides on this topic
IHT (Inheritance Tax): allowances & rates
What are the current rates and allowances for Inheritance tax?
IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and Inheritance Tax (IHT).
External links
Inheritance Taxation in OECD Countries
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