As a tax historian, I find it fascinating to delve into the roots of taxation. Inheritance taxes, for instance, date back to the Roman Empire, which collected 5 percent of all inherited property to fund soldiers’ pensions. Today, this practice is widespread, with 24 out of the 35 European countries covered in a recent study levying estate, inheritance, or gift taxes.
Estate taxes are levied on the property of the deceased and paid by the estate itself. In contrast, inheritance taxes are only levied on the value of assets transferred and are paid by the heirs. Gift taxes are levied when property is transferred by a living individual.
Countries typically charge either an estate tax or an inheritance tax. However, estates can be double taxed if they fall under two jurisdictions that apply different taxes. To prevent or relieve double taxation, European Union Member States have installed mechanisms.
The tax rates applied to estates, inheritances, and gifts often depend on the level of familial closeness to the inheritor as well as the amount to be inherited. For example, in France, different rates are applied to transfers to ascendants and descendants, transfers between siblings, blood relatives up to the fourth degree, and everyone else. For transfers to ascendants and descendants as well as between siblings, higher rates are applied to larger sums of money.
In some countries—such as Belgium, Spain, or Switzerland—estate, gift, and inheritance tax rates also vary by region. Most European countries do not tax transfers below a certain amount.
Despite the potential of inheritance, estate, and gift taxes to reduce wealth inequality, their limited capacity to collect revenue and their negative impact on entrepreneurial activity, saving, and work should make policymakers consider their repeal instead of boosting them.
For a more detailed look at the tax rates in different European countries, I recommend visiting the original source of this information at Tax Foundation.
Remember, tax evasion is not a solution. It’s our responsibility as citizens to contribute to the well-being of our communities by fulfilling our tax obligations. Stay informed, make wise decisions, and let’s build a better society together.