Thursday, January 5, 2017

The tax on inheritances accused of promoting inequality – The Figaro

VIDEO – France Strategy, organization attached to the prime minister, calls for several measures to make the tax system applied to successions and donations less “complex” and more “re-distributive”.

The report of France Strategy is without appeal. The taxation of inheritances and donations must be reformed “in-depth”, because it still remains too complex and prevents the proper redistribution of wealth to the younger generations. The agency thus recommends several avenues of reform to rebuild this system from the point of view of the heirs”, in a analysis note entitled, “Can we avoid a society of heirs,” published on Thursday.

” Read also – Taxation: that is not going to in France

First of them: a modification of the rules deduction, which is currently the same on inheritance and donations. As a reminder, the beneficiaries of an inheritance must be succession duties, that is to say paying back a portion for taxes. But devices of abatement lower this donation. As an indication, the tax revenues related to the transfer of assets reached 12.5 billion euros. It is five times more than in 1980. In reviewing the current schedule, the objective is, at term, to promote the “transmissions earlier”. If such a measure is applied, it does not address, however, not to the “inequities of the system,” admits France’s Strategy.

The latter thus proposes a second reflection. It would tax the total assets received by the heir during his life, and not the inheritance passed on to each death. In practical terms, this means that the rate of taxation, would increase as a function of the amount of wealth inherited. And this, regardless of the origin of the transmission. This time, it would encourage the owners of heritage to “disperse their legacy”, by transmitting money to individuals who have inherited some. Finally, France Policy issues the trail of an “endowment universal heritage”. Paid by the State to all individuals, it would allow everyone to benefit “from a start-up capital at the time of entry into adult life”. It would be funded by a portion of the proceeds on the transmissions.

If France Policy has issued this note of analysis, it is for a specific reason: demography. The death of generations many of the baby-boom will necessarily lead to an increase in the amount transmitted. The transmissions, in constant euros, increased from 60 to 250 billion since 1980 to represent today approximately 19% of the income of households, against 8% that is 35 years old. And the phenomenon is expected to continue, as the transmissions could represent between 25% and 30% of the income in the second half of the twenty-first century.

Another essential issue: the inequality of wealth. In the past twenty years, the heritage is concentrated in the hands of the most affluent”. “The 1 % of the wealthiest households in the field of heritage each have more than € 1.95 million euros of assets,” said Insee, in a note published in November 2016. “In contrast, 10 % of households in the least with each hold less than 4 300 euros of heritage and collectively less than 0.1 % of the total mass”. “In a context of slow economic growth, [the increase of the amounts transmitted] may accentuate social reproduction, since the individual destinies depend less on the path of individual incomes, and more of the importance of legacies received”, underlines France’s Strategy.


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