The Behavioral Effects of Inheritance, Estate and Gift Taxes

Olli Ropponen

No 157, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract This report examines the behavioral effects of inheritance, estate and gift taxes. It also provides an overview of inheritance, estate and gift tax practices in other countries, as well as the reasons that led to the abolition of inheritance taxes in Sweden and Norway. Economic literature acknowledges various behavioral responses to inheritance, estate and gift taxes from both the bequeather and the heir, with wealthier individuals demonstrating greater sensitivity to such taxes. These responses encompass both real behavioral changes (such as migration) and tax avoidance strategies. These behavioral distortions affect both the efficiency and revenue-raising potential of inheritance, estate and gift taxes. Among OECD countries, a significant number impose inheritance, estate and gift taxes, while others do not, some have abolished them, and a few have never implemented such taxes. Among Nordic countries, Sweden and Norway have abolished these taxes, citing several reasons: they were seen as obstacles to the intergenerational transfer of family businesses, their administrative burden was deemed high, and compared to the administrative burden the revenues collected were relatively low. Additionally, the taxes facilitated tax planning opportunities and were perceived as inequitable.

Keywords: Inheritance; estate and gift tax; Behavioral responses; Tax elasticities; Tax avoidance (search for similar items in EconPapers)
JEL-codes: D9 H24 H26 H3 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2025-01-28
New Economics Papers: this item is included in nep-pbe and nep-pub
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