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Wealth Transfers and Tax Planning: Evidence for the German Bequest Tax

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  • Sommer, Eric

    (AXA AG)

Abstract

The rising importance of bequests as a source of personal income lead to renewed interest in the taxation of wealth transfers. Empirical evidence on distortionary effects of bequest taxation is relatively scarce. On the basis of administrative data for Germany, this paper assesses the extent to which taxable bequests are targeted to the tax code. I investigate bunching at discrete jumps in the marginal tax rate. While there is evidence for tax planning in case of inter-vivo gifts, inheritances do not exhibit bunching. Further heterogeneity analyses demonstrate that tax planning is highest for gifts between close relatives. While the overall tax base responsiveness is rather low, the findings suggest that bequest tax planning almost exclusively occurs for donors rather than recipients of wealth transfers. Beyond, tax planning is more prevalent for close relatives and large estates.

Suggested Citation

  • Sommer, Eric, 2017. "Wealth Transfers and Tax Planning: Evidence for the German Bequest Tax," IZA Discussion Papers 11120, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11120
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    Cited by:

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    2. Glogowsky, Ulrich, 2021. "Behavioral responses to inheritance and gift taxation: Evidence from Germany," Journal of Public Economics, Elsevier, vol. 193(C).
    3. Stefan Jestl, 2021. "Inheritance tax regimes: a comparison," Public Sector Economics, Institute of Public Finance, vol. 45(3), pages 363-385.
    4. KRENEK Alexander & SCHRATZENSTALLER Margit & GRUNBERGER Klaus & THIEMANN Andreas, 2022. "INTAXMOD - Inheritance and Gift Taxation in the Context of Ageing," JRC Working Papers on Taxation & Structural Reforms 2022-04, Joint Research Centre.
    5. Margit Schratzenstaller, 2023. "Behavioral Responses to Inheritance Taxation. A Review of the Empirical Literature," WIFO Working Papers 668, WIFO.

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    More about this item

    Keywords

    bequest tax; tax planning; bunching; administrative data;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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