PARIS: Rising financial inequality can be tackled and public finances improved at the same time by hiking inheritance, estate and gift taxes, the OECD said in a report Tuesday.
The report on inheritance taxation highlighted that the richest 10 percent of households across 27 OECD states are estimated to own around half those countries' total wealth, with the richest one percent holding 18 percent.
"Inheritance taxation can be an important instrument to address inequality, particularly in the current context of persistently high wealth inequality and new pressures on public finances linked to the COVID-19 pandemic," said the report by the Organisation for Economic Co-operation and Development.
It noted that a majority of OECD countries levy inheritance or estate taxes yet typically raise very little revenue with them -- just 0.5 percent of total tax revenues on average, Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, told a press conference.
Inheritance fiscality differs widely from country to country. Whereas 48 percent of estates in Belgium are subject to inheritance tax, the figure is just 0.2 percent in the United States, where a raft of exonerations and high exemption thresholds can enable some parents to transfer as much as $11 million tax free to their offspring. That compares with around $17,000 in some parts of Belgium.
The report highlighted tax relief can apply commonly to transfers of specific assets including primary residences, pension assets, and life insurance policies and in some countries be avoided by making in-life gifts.
"Relief provisions primarily benefit the wealthiest households, reducing the effective progressivity of inheritance and estate taxes," thereby reinforcing inequality, Saint-Amans said.
While recognising that inheritance taxes are "not a silver bullet", the OECD found "strong arguments for making greater use of inheritance taxes," albeit better designed ones, not least through making a levy on total wealth received by beneficiaries over their lifetime through both gifts and inheritances.
"Other reforms, particularly in relation to the taxation of personal capital income and capital gains, are key to ensuring that tax systems help reduce inequality," Saint-Amans said.