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The Behavioral Effects of Inheritance, Estate and Gift Taxes

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  • Ropponen, Olli

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.

Suggested Citation

  • Ropponen, Olli, 2025. "The Behavioral Effects of Inheritance, Estate and Gift Taxes," ETLA Reports 157, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:157
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    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-157.pdf
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    More about this item

    Keywords

    Inheritance; estate and gift tax; Behavioral responses; Tax elasticities; Tax avoidance;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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