The Economic Analysis Council (CAE) has just published a note on heritage in France. A note which shows that the share of inherited wealth in the total wealth now represents 60%, against 35% at the beginning of the 1970s. This return of the inheritance, extremely concentrated, feeds a dynamic of reinforcement of the patrimonial inequalities based on the birth and the magnitude of which is much higher than the inequalities observed for labor income. In order to try to reduce these patrimonial inequalities, the authors of the note thus formulated several recommendations.
Improvement of the information system
First, the Economic Analysis Council deplores the fact that there is currently no reliable data from the tax administration. Until 2006, the administration carried out regular surveys in order to follow the evolution of the distribution (and taxation) of inheritances and donations. This lack of data has negative consequences and in particular does not make it possible to properly manage a tax policy on the issue of transmission. Faced with the complexity and multiplicity of systems, the low quality of tax information would also be likely to encourage abuse. The CAE calls on the public authorities to build a real information system for the DGFiP on the basis of declarations from notaries and insurers (on the FICOVIE model) and to set up a register of anonymized data sent to the Secure Access Center for data (CASD), in order to improve the quality of official statistics and allow the development of independent research on these tax data.
Implementation of a tax policy on the total inheritance flow
Inequalities in total inherited wealth throughout life are strong. It has been observed that the richest heirs benefit from multiple inheritance transmissions during their lifetime. And as each transmission is taxed separately, it is possible, through the play of different tax systems, to optimize these transmissions. Although measures have been taken in the past to try to mitigate this phenomenon (reduction of the tax reminder period and allowances, progressivity of tax rates, etc.), it is ultimately the smallest transmissions that have been penalized.
Based on this observation, the Economic Analysis Council invites the establishment of a tax base based on the sum of the total inheritance flows received by the same individual throughout his life. In this system, the tax rate would depend only on the value of inheritances received, regardless of how the inheritance was passed. The Council gives a concrete example: an heir who has benefited from three donations of 100,000 euros during his life, and an inheritance of 200,000 euros from each of his two parents, pays the same tax as the one who inherits 700,000 euros from one of his parents only. Lifetime inheritance tax would therefore offer the possibility of a more targeted and efficient redistribution of opportunities.
Overhaul of the inheritance tax base
Still in this concern for balance and fairness, the Economic Analysis Council recommends overhauling the inheritance tax base in order to ultimately eliminate or reform certain tax systems. The main targets are life insurance, the dismemberment of property, the Dutreil Pact and the write-off of capital gains at the time of death. This overhaul would also be an opportunity to set up nominal rates for the scale that are lower but really progressive. With these reforms, it would be possible to reduce inheritance taxes for 99% of the population, while generating a substantial revenue surplus of 12 billion euros.
Creation of a capital guarantee for all
Finally, another recommendation, to guarantee a capital for all. The latter would be paid to the majority in order to limit the most extreme inequalities. A payment made at 18 or 25 and which could represent 10,000 to 40,000 €. This capital would make it possible, in part, to remove the credit / liquidity constraints which negatively affect access to education, investment and housing at the bottom of the inheritance distribution.
Economic Analysis Council – Rethinking the Legacy, December 2021