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Fair inheritance taxation in the presence of tax planning

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  • Wrede, Matthias

Abstract

This paper presents an analysis of the extent to which tax planning affects the level of the inheritance tax rate that is perceived to be fair. In a survey with an experimental design conducted in Germany, tax planning was found to increase the fair tax rate by approximately 4 percentage points. The fair tax rate is determined by not only the size of the bequest, the relationship of the heir to the bequeather, and the type of bequest, but also by the perceived intentions of the bequeather. The preferred interpretation of the result is that families with pro-social motives should be taxed less than those without pro-social motives. The analysis described in this paper finds support in optimal tax theory. To this end, a simple model was developed that shows that taxation should not prevent individuals with joy-of-giving motives from contributing substantially more to the social good than individuals who do not share these motives.

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  • Wrede, Matthias, 2014. "Fair inheritance taxation in the presence of tax planning," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 12-18.
    • Handle: RePEc:eee:soceco:v:51:y:2014:i:c:p:12-18
    DOI: 10.1016/j.socec.2014.03.007
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    1. James R. Hines & Niklas Potrafke & Marina Riem & Christoph Schinke, 2019. "Inter vivos transfers of ownership in family firms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(2), pages 225-256, April.

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    More about this item

    Keywords

    Tax planning; Inheritance tax; Fair taxation; Joy of giving;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D6 - Microeconomics - - Welfare Economics

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