The inheritance and gift in Germany: Reform potentials for , efficiency and distribution

MARTIN BEZNOSKA, Dr.* TOBIAS HENTZE, Dr.* MAXIMILIAN STOCKHAUSEN, Dr.*

Article** JEL: D31, H20 https://doi.org/10.3326/pse.44.3.5

* The authors would like to thank the two anonymous referees, Hrvoje Šimović, the participants of the confer- ence Public Sector Economics, October 24 2019 in Zagreb, Andreas Thiemann, and the participants of the in-depth session Inheritance and in Germany, October 16 2019 in Brussels organised by the Euro- pean Commission for useful comments and suggestions. ** Received: November 6, 2019 Accepted: May 13, 2020

Martin BEZNOSKA German Economic Institute, Postfach 10 19 42, 50459 Köln, Germany e-mail: [email protected] ORCiD: 0000-0002-9966-221X

Tobias HENTZE German Economic Institute, Postfach 10 19 42, 50459 Köln, Germany e-mail: [email protected] ORCiD: 0000-0003-0900-8554

Maximilian STOCKHAUSEN German Economic Institute, Postfach 10 19 42, 50459 Köln, Germany e-mail: [email protected] ORCiD: 0000-0002-6340-6142 - - - 1 INTRODUCTION a to led Century” Twenty-First the in book “Capital Thomas Piketty’s In 2013, amongst other things, that He argued, in the public debate on inequality. surge distribu- of wealth inequality the explaining in role important an play inheritances to a wealth and inheritances Against this background, taxing 2013). tion (Piketty, an inheritance estimates for example, Piketty, is back on the table. extent larger between 50 percent and 60 percent as optimal regarding the equity-effi and Saez, 2013). Equity for the United States and France (Piketty trade-off ciency inher the of Proponents policy. tax in principles central two the are efficiency and its potential tax – emphasize tax – referred to below as inheritance and gift itance power to fight wealth inequality (Beckert and Arndt, 2016).OECD According (2018), from to the both an efficiency and an equity to on net taxes are a feasible tool in and are a better alternative perspective, inheritance of assets usually valuation wealth. In contrast to a net , the complex and, thus, raising the tax of annually instead only once per generation takes place In addition, inheritance taxes tend to be less distortive. is less costly. widely supposed that for another reason: It is taxes are of great interest Inheritance will continue to grow the volume of inheritances due to demographic changes. Abstract: The is often seen as an effective tool to wealth reduce inequality, lowering by work to incentives increase to and needed, if revenues public raise to the tax which burden on is labour, especially high in according Germany, to the OECD. The purpose of this paper is therefore to shed with- inequality wealth light fighting for tool promising on a is tax inheritance an whether the question of - distribu the firstly, purpose, this For economy. the on effects distorting having out tional effects of inheritances on wealth distribution are evaluated for Germany and are then compared with those in Austria and France, using data Household from Finance the and Consumption Survey (HFCS). A change in the German to analysis difference-in-difference a in used further is 2009 in law tax inheritance volume the on tax inheritance the in change the of effects behavioural the identify of bequests, the and for which specifications.large robust different are Secondly, insight from part one is applied to the design of an inheritance The Germany. tax potential tax revenue reform of the for reform can be estimated by using the data from the inheritance and gift tax statistics. A revenue shift from income to the marginal by cutting work incentives tax could be used to increase inheritance tax rates for the working population. it However, turns out that tax taxing via donors of responses inherit behavioural significant by accompanied be will ances tax of base a model with athe broad introduction planning. Furthermore, would not generate enough additional revenue to foster effects. relevant employment Keywords: inheritance taxation, wealth distribution, redistribution, inequality, Germany labour supply,

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economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

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387 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - 2 INHERITANCE TAX IN GERMANY TAX 2 INHERITANCE role in public debates, it is of minor tax plays an important Even if the inheritance importance from a fiscal perspective. In all OECD countries the revenue it pro- total tax revenue (including social secu- duces accounts for less than 1 percent of rity contributions). In Germany, the fiscal importance of the inheritance (Figure 1). Only in Bel- of GDP percent at below 0.2 above the OECD average tax is tax inheritance of the relevance is the and Japan Korea Finland, France, gium, significantly greater than in Germany. Eleven OECD countries do notinheritance tax at all. levy an The volume of taxable inheritance has more than doubled in the past decade. past decade. in the doubled more than has inheritance taxable volume of The by to work, the incentives increase tax might the inheritance from revenue Higher accord high in Germany is particularly which tax burden on labour, lowering the This is understandable since cutting the personal tax allowances would most would allowances tax personal the cutting since understandable is This of out three survey, representative a to According voters. by accepted be not likely 1 mil exceeding of inheritances taxation four Germans are in favour of the higher - to deci been subject tax in Germany has repeatedly the inheritance Historically, and issues. Substantial discrimination court regarding constitutional sions by the is law tax inheritance the Currently, claimed. been often have reforms long-lasting percent of up to 50 rates tax one hand by high and progressive on the characterized as well as tax by remarkable personal tax allowances and, on the other hand, on inheritances tax rate This limits the effective assets. exemptions for business rev- tax in terms of total 1 percent of less than proportion to a revenue and leads will in Germany for that the political court decisions indicate The repeated enue. been very high. any reform has not ing to the OECD (2019: 147). The International Monetary Fund (IMF, 2019) pro- 2019) Fund (IMF, Monetary International The 147). (2019: OECD to the ing on wedge tax the First, pillars: two of Germany consisting for reform tax poses a be property taxes should and Second, inheritance be decreased. labour should any fiscal needs. used to satisfy example, a This implies that, for 57). lion euro per heir (Deutsche Bank, 2018: ensured. be should house”) (“grandma`s estate real private a of bequest tax-free decisions comes at a cost, since optimal of inheritances the taxation Furthermore, This is espe- of testators are distorted. accumulation for consumption and capital could shares as business continuity company risky in the case of inherited cially would This unemployment. increase can consequence in which threatened, be can- unemployed the since long run, in the inequality gaps in wealth widen of the A matter. is a complex tax inheritance of the any reform Therefore, all. at not save efficiency. and equity of degree high a achieve to needed is law tax well-designed - - 1 igure cent to the total tax revenue (without social security contributions). In the 1980s In the contributions). security (without social revenue tax to the total cent reaching an all-time The uptick continued, and 1990s, the value went up slightly. Ger in tax revenue total In 2018, while 1 percent. 2016 of almost in maximum tax inheritance the from revenue the euro, 780 billion nearly to amounted many is about 0.8 percent. only amounted 6.7 billion euro, which long-term A trend for the fiscal importance of the inheritance tax to increase can since 1991 is remarkably higher than that be seen in Figure 2. Its overall growth changes, be due to demographic may tax revenue. Some of these increases of total in the volume and bequest concentration to foster wealth expected which are 2015). But another reason may be future the (Zagheni great Wagner, and fluctua- donors and testators in response to tax tion of the tax base via tax planning of will be exam- phenomenon of the latter The appearance 2017). reforms (Sommer, ined in the following chapters. The inheritance tax has been of minor fiscal importance in Germany for decades. only 0.3 per on average contributed 1960s and 1970s, it In the beginning of the Note: OECD statistics total tax include revenue social security dif- contributions and therefore to 2016. refers statistics. The value for Greece national fer from OECD database, own illustration. Source: F 2017 countries, in OECD GDP of as percentage tax Inheritance

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economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

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389 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - 30 30 30 30 50 50 50 Tax class III Tax 15 20 25 30 35 40 43 Tax class II Tax 11 7 15 19 23 27 30 Tax class I Tax 75 300 600 6,000 13,000 26,000 2 above 26,000 1 able igure Tax bracket in euro bracket in euro Tax up to thousands Up to 2008, Germany imposed an inheritance tax with a general tax allowance for tax with a general tax allowance Up to 2008, Germany imposed an inheritance was that for business assets method valuation a with combined business sector the Source: German inheritance tax and gift , own illustration. inheritance tax and gift tax law, German Source: T Inheritance tax rates (in %) In Germany, the inheritance tax has always been levied on the inheritor. In con- on the inheritor. tax has always been levied the inheritance In Germany, inherit the and once at taxed is inheritance whole the States, United the in trast, and depend on the value of the inheritance tax rates are progressive The nominal degree the by defined are classes tax three The 1). (Table class tax the on as well as the while 7 percent, to is equal rate tax minimum The 2). (Table of relationship maximum is 50 percent. Source: Bundesministerium der Finanzen, 2019; own calculations. Source: in tax design implies that the This difference ance tax must be paid by the testator. inheritance the of value the than smaller significantly often is Germany in base tax as it is divided by the number of inheritors. F (in %) 1991=100 Index: in Germany, tax revenue and total tax Inheritance - - - I I I I II III tax law) Tax class Tax (§ 15 Inheritance 400 200 100 20 20 500 tax law) allowance Personal tax (§ 16 Inheritance

2 able For children and grandchildren whose parents For children and grandchildren whose parents have died, as well as for stepchildren and adopted children For grandchildren For great-grandchildren; for parents and grandparents to acquire by inheritance For parents and grandparents in the case of gift, for siblings, children of siblings, parents-in-law, stepparents, children in law, divorced spouses and life partner of a cancelled civil partnership For all other recipients of a gift or inheritance For spouse and partner of a registered civil partnership ees is now set to five in order not to generally exclude too high a share of compa of share a high too exclude generally to not order in five to set now is ees shares within a few years, if heirs sell the company nies from the tax. However, they will lose the . Source: German inheritance tax and gift tax law, own illustration. German inheritance tax and gift tax law, Source: Constitutional Federal by the again new rules were challenged the Nonetheless, exemptions introduced by the previous Court in 2014 since the extent of was not Thejustified. law had to be renewed by June 30, 2016. However, for the business sector was not challenged. the general approach of tax exemptions The judgement consisted of three pillars. to a commitment heirs of small businesses must demonstrate even the Firstly, 20 employees up to with Companies tax. the from exemption obtain jobs to retain of employ number maximum The before. requirements from these were excluded T and tax classes (in thousand euro) Personal tax allowances not intended to reflectmarket value and, thus,led As to fam- rather small values. ily-owned companies play a significant role in the German taxing economy, the dis- a competitive means of succession case in the business of a family substance or even put existing future investments This can limit company. for this advantage The rules. these challenged court constitutional Federal the However, risk. jobs at inheritance tax had to be renewed since the assessed tax values did not reflect the categories dif- for the relevant asset The valuation 2006). (BVerfG, actual value Ger in modified were exemptions tax and rules tax the Hence, significantly. fered and rules as well as increasing tax allowances the valuation many by changing exemptions for businesses.

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

390 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

391 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

- 1 35 44 89 7.6 7.0 0.6 8.55 13.16 market Current Current valuation 30 - - - - 9.63 13.75 reform the 2016 Law after Law after 1 5.1 4.5 0.6 - 19.61 19.61 reform the 2016 Law before Law before

3 able Markdown due to limited fungibility of family owned companies (in %) Adjusted capitalization factor In percent of (1) In percent of (2) Capitalization factor (1/capitalization rate) Capitalization rate (in %) Beta factor Market risk premium (in %) Basic interest rate (in %, 2019) Note: Current market valuation compared to the rule of law before and after the reform in 2016. in reform the after and before law of rule the to compared valuation market Current Note: (2019); own calculations. KPMG Source: T of business assets Valuation Second, what are called administrative assets, including non-business assets such such assets non-business including assets, administrative called what are Second, past. the as in generously as spared no longer were land, or leased of art as pieces decreased been has assets operating to assets administrative of ratio maximum The percent the assets exceeding administrative Those to 10 percent. from 50 percent In the context of the reform, the valuation parameters for business assets were business assets for parameters valuation the reform, the of context the In of overvaluation In 2015, the any overvaluation. in order to eliminate corrected is magnitude The 2016). (Hentze, 60 percent 50 to business assets was about (hypothetically) confirmed by (2019) today’s parameters, assuming the previous (3) in calculation value of 44 percent A 3). (Table tax law to be still effective of the valuation to the adjustment of 56 percent. Due means an overvaluation of tax reform in 2016, the overvaluation part of the inheritance as parameters to equal is value (market percent 11 approximately to declined ­business assets Third, the heirs of large companies or company shares will not be able to avoid thenot be able to avoid shares will companies or company heirs of large Third, the ability- financial no have they that prove can they unless anymore, rate tax statutory corporate heirs has criticized the exemption of large The constitutional court to-pay. the federal gov- For this reason, situation and solvency. regardless of their economic heir. per value inheritance of terms in euro 26 million of threshold a set has ernment tax exemptions is taxed the full inheritance value without any Above this threshold, heir must use up to 50This means that the no ability-to-pay. unless the heir has want to disclose the assets to pay the bill. If the heir does not percent of own total declining with the heir can accept a smaller tax exemption value of private assets, (Beznoska and Hentze, 2016). the value of the inheritance age rate are fully taxed. age rate are 3). Table see 89 percent of the current tax law value, - - - -

ON NET WEALTH INEQUALITY WEALTH ON NET DISTRIBUTIONAL EFFECTS OF INHERITANCES INHERITANCES EFFECTS OF DISTRIBUTIONAL ticular contribute to a large extent to the gap between wealthy and non-wealthy wealthy gap between the to extent large to a contribute ticular owned by a rather small 2019). Company shares are mainly households (IMF, businesses is highly of family terms in wealth Therefore, of households. number businesses for the Ger of family even if the importance However, concentrated. unclear is it higher, stockholders of share the and lower were economy man whether the resulting wealth concentration would be significantly lower in the very unequal tend to be could still long run because the stockholder allocation the low share of people owning stocks in among German households. In addition, of expect a rather unequal distribution Germany today gives us reason also to fraction of company of the world while a large state stocks in this alternative shareholders, which would reduce the stocks could also be owned by foreign among German households. equalizing effect ine- wealth increase inheritances distributed unequally is that belief common A two distinct have inheritances But heavily. and, thus, should be taxed quality within a gen- inequality increase generally On the one hand, inheritances effects. wealth redistribute inheritances hand, other 2014). On the (Brunner, eration too. In sum, effect, an inequality-decreasing and thus have generations between the latter effect seems to outweigh the first, so that the overall effect of inherit Werder 2014; Bönke, and Gittleman, Wolff (see ances is inequality-decreasing 2017; Beznoska, Niehues and Stockhausen, 2018: 13). Westermeier, and As we know from previous research, inheritances are crucial for the relative net for the relative are crucial As we know from previous research, inheritances among distributed unequally are households and they of private position wealth have inherited wealth – the About one third of all European households them. wealth- these households are on average share is also one third in Germany – and the and Schürz, 2015). In addition, ier than those without any bequests (Fessler par businesses in of family inheritances that Fund states Monetary International 3.1  3 INHERITANCES AND NET WEALTH INEQUALITY WEALTH AND NET 3 INHERITANCES are effects what behavioural distribution and shape wealth How inheritances of volume on the tax inheritance in the with a change ­associated bequests is the on net of inheritances effects the In particular, chapter. following of the subject survey data framework using are discussed in a comparative wealth distribution the Household Finance and Consumption Austria, and France from for Germany, differ by a comprehensive analysis is extended The descriptive Survey (HFCS). The modified valuation parameters partly offset the restriction of tax exemptions tax burden the business inherited of assets. Generally, liability the tax regarding 2016 while in reform the to due has increased of companies inheritances for large 2016). (Beznoska and Hentze, for smaller ones it can be lower Germany and between the differences analysis exploiting ence-in-difference inheritance German in the change the of effect behavioural the to identify France volume of tax law in 2008 on the bequests.

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economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

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393 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - a household has ever received. The same equalizing effect also persists if a different inequality measure is used is measure inequality different a if persists also effect equalizing same The are this for used data The 2014. in coefficient Gini the here year, recent more a for taken from the HFCS, first conducted in 2010 under the supervision ofthe Euro- for used been 2014, have wave, in second of the Data Bank (ECB). Central pean The available. yet not is 2017, year the covering wave, third The analyses. our 84,000 households in than for more data household harmonised HFCS provides also covered Hungary and Poland are Lithuania. except countries 18 euro area on assets, information rich HFCS is its of the advantage major A (ECB, 2016). encom also It eurozone. the in of households consumption and income liabilities, In this regard, Bönke, Werder and Westermeier (2017) show for a wide range of range for a wide show (2017) Westermeier and Werder Bönke, regard, In this including wealth net overall on of variation coefficient the that countries area euro - is sub of inheritances value capitalized the if than smaller is always inheritances the For example, is Luxembourg. only exception The from net wealth. tracted coefficient ofvariation on netwealth includinginheritances is 2.8 inGermany in net from excluded is inheritances of value capitalized the if 7.1 is it while 2010, variation of coefficient The similar: are France and Austria for results The wealth. If the Austria and 3.6 in France. is 2.9 in inheritances including wealth on net capitalized value of inheritances is excluded from net wealth, the coefficient of 105.6, respectively. variation is 12.3 and In Figure 3, Gini coefficients on capitalizedbequests (assuming a real interest rate capitalized bequests, and net wealthof 3 per cent on average), net wealth including inFrance and Austria, Germany, for depicted are bequests capitalized excluding These three countries are well suited for comparison because of similarities 2014. as well as structural parameters of thewith regard to the level of the welfare state 1) Capitalised inheritances are generally the mostThree things stand out: economy. the highest degree of inequality of theseunequally distributed and France shows capitalised inheritances is more equallythree countries. 2) Net wealth excluding The most equally distributed is net wealth including distributed than inheritances. 3) ato leads distributions unequal two of combination the Thus, bequests. capitalized can be observed in all three countries This effect third, more equal distribution. facts that the relative importanceThis mainly results from the under consideration. an increase of the wealth position andof the value of inheritances decreases with and Werder that inheritances are usually divided among several heirs. Or as Bönke, (2017) put it: “in relative terms – poorer households tend to receive Westermeier higher inheritances”, which reduces overall relative net wealth inequality. passes data on the time and value of the three most important inheritances and inheritances most important three and value of the on the time passes data gifts inter vivos a shown of inheritances effect priori whether the redistributive 3 igure above will increase or decrease as a result of a progressively designed inheritance as a result of a progressively designed or decrease above will increase it depends on how exemptions are designed, who receives the tax. Ultimately, tax inheritance how the and distribution, wealth the in position the i.e. inheritance, tax revenues are rarely passed on to Since inheritance revenues are redistributed. does not necessarily taxation less wealthy households as a direct wealth transfer, Similar equalizing effects are found in Boserup, Kopczuk and Kreiner (2016) for are found in Boserup, effects Similar equalizing (2018) for Sweden. Waldenström Erixson and as in Elinder, as well Denmark effects the evaluate to datasets administrative comprehensive exploit studies Both bequests that find also They wealth. net of distribution and level the on of bequests of bequests among due to a higher variance inequality wealth absolute increase relative the since inequality, wealth of relative measures decrease they but heirs, pre-bequest for households with no or little of bequests is larger importance wealth. distribu- on the tax of an inheritance effects direct on the literature empirical The of lack for this is the reason One major very limited. wealth is still of net tion tax includes allowances Since an inheritance data in most countries. appropriate many countries, the tax is quasi-progres- and gradually rising nominal tax rates in tax rate increases with increasing nominal so that the average sive by construction, due to for example, rate can differ, tax the effective However, value. inheritance tax can of the inheritance effect The overall for business assets. tax exemptions thus be regressive. It is not clear Note: A real interest rate interest Note: A of real 3% per annum is used for capitalisation since the year of transfer - con specific country using 2010 of prices in expressed are bequests all purpose, this For receipt. sumer price indices. ECB, 2nd wave; own calculations. Source: F (2014) and France Austria, in Germany, wealth types for different coefficients Gini

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economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

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395 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - These problems make it even more difficult to of bequests. However, we shall endeavour to approach this approach to endeavour shall we However, bequests. of the volume the and BEHAVIOURAL EFFECTS OF AN INHERITANCE TAX TAX AN INHERITANCE EFFECTS OF BEHAVIOURAL BEQUESTS OF ON THE VOLUME The rich information content of the HFCS can also be exploited to depict the depict to exploited be also HFCS can the of content information rich The countries. Nev- over time in different of the volume of inheritances development of the HFCS data regarding, for ertheless, we are aware of several limitations non- item and or issues of unit rich very of the representativeness the example, is still (the very top rich of the oversampling addressed by response, which are information missing generate to imputations of multiple or strategies missing) (Tiefensee and Grabka, 2016). 3.2  tax on individual behav- of an inheritance statements on the effects make reliable iour lead to a greater alignment of net wealth. If, for example, inheritance tax receipts receipts tax inheritance If, for example, wealth. net of alignment a greater to lead are used to financebasic insurance benefits, this willequalise income flows, but gift or inheritance an contrast, In term. short the in not least At stocks. wealth not directly – that households cases between – in many transfer wealth is a direct of inher taxation 100 percent a even Hence, wealth. of net distribution the effects Elinder, Erixson and Waldenström (2018) were the first to examine the (mechani the examine to first the were (2018) Waldenström and Erixson Elinder, Austria in tax in of the inheritance of the abolishment the effect Unfortunately, our for exploited and observed be cannot wealth of net distribution the 2008 on 2010. years before for the data wealth is no comprehensive there since analysis, not Austria did in tax at the very least, the abolition of the inheritance However, years 2010 and 2014 net years. Between following rise in the inequality wealth let wealth inequality – measured by the Gini coefficient – decreased and remained Lindner and Schürz, 2019). In Germany, unchanged up to the year 2018 (Fessler, not by 2018 had 2014 but 2010 to from increased slightly inequality wealth net 2019). changed very much (Deutsche Bundesbank, itances would not automatically lead to a decrease in net wealth inequality. The inequality. wealth net in decrease a to lead automatically would not itances be the case. opposite could using Swedish For tax data. tax on wealth inequality, of an inheritance cal) effects this purpose, they calculate the difference of Gini inheritances including and payments net-of-inheritance-tax inheritances including coefficients for net wealth The behavioural responses of testators or heirs due to before tax payments. find- key Their analysis. their in considered not are taxation inheritance in changes (but reduces absolute inequality relative increases inheritances ing is that taxing for less wealthy is larger burden tax inheritance relative the since dispersion), tax (progressive) inheritance a Hence, wealthy. for the than households of heirs are small. although the effects counteracts the equalizing inheritance effect, For this purpose, Germany, France, and Austria are investigated in more detail, more in investigated are Austria and France, purpose, Germany, For this tax changes in their inheritance interesting since they all have undergone again, the at Austria was abolished in of inheritances taxation While years. laws in recent question with cautious use of HFCS data, still the best available. beginning of 2008 (except for transfers of real estate), allowances were increased increased were allowances estate), of real for transfers (except of 2008 beginning and unified were brackets tax and 2009 1, January to Germany in classes tax all for for tax exemptions the general Additionally, relatives. distant for increased partly with rules combined by new valuation replaced in Germany were business assets before However, before. than more comprehensive were which exemptions, a on made were demands complex and considerable granted, were exemptions on debate The 2). chapter of jobs (see retention the guarantee to ability business’s in was very intensive in Germany taxation changes to inheritance necessary the period allowable maximum for the delayed legislator the 2007 and 2008 and as to was uncertainty there result, As a regulations. new the implementing before their have changed to seem and households be introduced would reform when the This is in 2008. of gifts already planning to the with regard particularly behaviour, the main reason why we already include 2008 in the first period after the reform As a robustness this check we will change analysis. in a difference-in-difference inheritance the France, In reform. the after period first the from 2008 exclude and were in 2008 and higher allowances for spouses abolished tax was completely granted in 2012. Figure 4 depicts the descriptive analysis of the volume of inheritances for tax before and two after the inheritance periods of a similar length; three periods five and namely 1996-1999, 2000-2003, 2004-2007, 2008-2011, reform in Germany, is That of four. instead years three only encompasses period last The 2012-2014. to next scale) in Figure 4 (right depicted also are averages period why the yearly meas- volume inheritance the that find we general, In scale). (left totals period the ured in 2010 prices increased in all three countries during the first three periods. period: fourth the in changes trend The Austria. in is less pronounced increase The from 304 bil- volume more than halves and decreases the inheritance in Germany, continues it France, In four. period in euro 135 billion to three period in euro lion Austria, the inheritance euro. In billion a new high of 202 and reaches to increase euro. volume increases from 25 to 34 billion The decrease in developments? different What are the probable reasons for the tax rates for distant relatives com- Germany can be the result of higher inheritance that took place before the introduction of the bined with some pull-forward effects in source of uncertainty large A the future. reform and are due to uncertainty about regarding business assets, which the new rules stem from this period can especially Higher tax allowances introduced a lot of complexity into the inheritance tax law. but they seem to be less for spouses/partners should have counteracting effects, This might also be due to the data structure of the HFCS which only covers strong. the in live spouses beneficiary cases most in while households among inheritances The abolition of the inheritance tax for spouses in France in 2008 same household. that is also not covered well in the HFCS should therefore have a positive effect because it helps estimator this is good news data. For our difference-in-difference of the German inheritance tax reform on the level of us to clearly identify the effect bequests. The increase Austria in is as expected, reflecting the complete abolition

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

396 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

397 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - - - coun each in different also is period fifth the to fourth the from development The increase to and continues increases of inheritance the volume Germany, In try. in average period The yearly in 2008. reform before the speed as with the same period fiveis even slightly higher than in the third period. In France, the volume of inheritances does not change between the fourth and fifth period regarding the tax inheritance was another there since This is as expected averages. period yearly In con- were decreased. for close relatives allowances reform in 2012 in which Austria from the in of the mean volume of inheritances trast, there was a decrease fourth to the fifth period. This may be induced by pull-forward effects that took descrip- the Overall, tax. inheritance of the abolishment of the period in the place are accompa taxation that even minor changes in inheritance shows tive analysis of the inheritance tax in 2008. The effects of the Great Recession in 2007/2008 in Great Recession of the The effects 2008. tax in inheritance of the and volumes in inheritance trends the regarding less importance to be of seem in a similar way. the three countries affected should have Next, a difference-in-difference estimator is applied to Germany and France to is applied estimator Next, a difference-in-difference tax changes in Germany in 2008 of the inheritance effects the differential identify between Ger country differences on the volume of bequests. For this purpose, is estimator difference-in-difference of the validity for the assumption critical A both in similar been have must volume inheritance of the development the that trend assump- (but not in the levels). If the common countries before the treatment estimator would be biased then the difference-in-difference tion is violated 1994; Meyer, and Card, 1985; Card and Krueger, Ashenfelter 1978; (Ashenfelter, 1995; Bertrand, Duflo and Mullainathan, 2004; Schmitz, 2019, among others). assump- trend common the that evidence gives 4 Figure in analysis Our graphical Austria is happened. the treatment tion holds for Germany and France before trend common the to violate is expected it since this setting, used in not therefore results. estimator to get unbiased assumption of the difference-in-difference nied by a considerable change in inheritance tax volumes as we would expect volumes tax in inheritance change by a considerable nied them from theory. inherit by the is created variation exogeneous and exploited are and France many classes tax across all increased were allowances where Germany in changes ance on the one hand and where tax brackets were unified and mostly increaseddistant relatives. for 4 igure Note: In billion euro and prices of 2010. 95% confidence intervals are calculated using multiple using calculated are intervals confidence 95% 2010. of prices and euro billion In Note: five imputations. imputation estimates from wave; own calculations. ECB, 2nd Source: F France and Austria, in Germany, volume Inheritance

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economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

398 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

399 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - - 612 19,322 89,724 is a treat- -29,242 103,219 -434 -2,357 32,580 37,418 is a time dummy that [95 % Conf. Interval] -105,408 . P>t 0.125 0.000 0.001 0.000 0.738 in period t 1.53 4.21 4.19 0.34 -3.47 t-value 266 5,530 14,536 19,401 16,779 Std. Err. 89 8,482 5,118 Coef. 61,152 70,319 -67,325 ) 2 β ) ) 3 4 β ) 1 since it captures the average treatment effect of the policy change, of effect since it captures the average treatment β is an error term. ) 0 is the inheritance volume in country i 4 able Variable Time dummy ( Time Treatment dummy ( Treatment Constant (β Observations Age of hh head (β Timedy#treatdy ( Timedy#treatdy ment dummy, which ment is dummy, one only for Germany and otherwise zero. The coefficient of interest is is equal to one in all periods after the reform and otherwise zero, while is equal to one in all periods after the reform Results of the difference-in-difference estimator L4P3 Results of the difference-in-difference T where In addition, France and Germany are especially suited for the comparison because because the comparison suited for are especially and Germany France In addition, size, the population example, for regarding, respects in many are similar they results the before, As mentioned system. transfer and tax the or capita, per GDP were both countries However, Great Recession. distorted due to the could be same the be should distortion the of direction the so that way, same the in affected In by this. much be affected not should estimator difference-in-difference the and inherit lower the the tax, inheritance the the higher that is assumed it this regard, The analysis makes use of observations before and after the inheritance tax changeuse of observations before and after the The analysis makes three four-year over is observed volume the inheritance As before, in Germany. The changes in France period after the reform in Germany. periods before and one covers inheritances minor importance, since the HFCS only in 2008 should be of (2012-2014) period fifth The intrahousehold. not and households different between reform in 2012 in France which wouldcannot be used because of the inheritance in Germany in the fourth period (2008- The treatment thus occurred the results. bias are exploited. between Germany and France regional differences and the 2011) The differ and France is the control group. Hence, Germany is the treatment group ance volume. The partial increase of the inheritance tax for distant relatives in tax for distant relatives increase of the inheritance partial The ance volume. in Germany in the led to a decrease in the mean volume Germany should have allowances. from the increased effect dominates the effect years following if this case, as shown in Figure 4 above. This seems to be the estimator can be written as ence-in-difference ed using multiple imputation estimates from five imputations. ed using multiple imputation estimates from wave; own calculations. ECB, 2nd Source: Note: Germany vs. France, period length = 4 years each, 3 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 3 periods before 1996-1999, period 2: 2000-2003, period 3: 2004-2007, All period inheritances 4: 2008-2011. calculat are errors Standard Germany. in place took Treatment 2010. of prices in measured are i.e. the effect of the abolition of the inheritance tax on the inheritance volume. In of the abolition of the inheritance i.e. the effect using the age of the household addition, the variable agehh controls for age effects head and - - is smaller than 3 ) is negative and statistically significantto the one percent 3 The results of the difference-in-difference estimation are shown in Table 4. We We 4. Table in shown are estimation difference-in-difference the of results The sig- a to led has 2008 in Germany in reform tax inheritance the that evidence find nificant decrease in the average inheritance volume. The estimated coefficient of (β effect the treatment 0.1, the estimator has the same negative sign as before and the scope of the effect has the same negative sign as before and the scope of the effect 0.1, the estimator for questions of tax planning important especially Since gifts are is quite similar. changes due to changes in the inheritance source of behavioural and are the main we found before (see most of the effects they are likely to explain tax regime, Appendix for the results). in the A7 A5 to Tables that evidence us empirical gives analysis difference-in-difference the In sum, by tax for example taxation, respond to changes in inheritance households directly the as was primarily are affected, planning of donors, even if only distant relatives Sommer of results the with line in broadly This is 2008. Germany in in case the behavioural is hard to interpret (2017). Even though the size of the effect and rela absolute by the large This is indicated large. responses seem to be rather due to different countries three in all of inheritances changes in the volume tive reforms as depicted in Figure 4. level controlling for potential age effects. If we replace the (continuous) age vari- age (continuous) the If we replace effects. age potential for controlling level and altered not are results main groups, the age different for dummies with able households with a mid-age head tend A8 to profitTable more from bequests (see periods before the treat Successively reducing the number of Appendix). in the The Appendix. A2 in the A1 and Tables the results as shown in does not alter ment and one the to significant statistically and negative be to continues effect treatment five percent level, Integratingrespectively. additional time dummies for the first does not change effects time model to capture the baseline and second period in Appendix). A3 in the Table the results, either (see In contrast, if the fifth period is included in the estimation the France 2012 in in reform tax inheritance the because treatmentis as expected This vanishes. effect points in the same direction in 2008, so that the effect was like that in Germany The results volume as in Germany. regarding the development of the inheritance the four- to the right by one year while retaining periods also change if we shift all year observation periods. This would make 2009 the first year after the reform. is which period, post-reform the in included is 2012 case this in since However, problematic in France, as mentioned, we no longer find a statistically significant three years so in this case. If we shorten all the observation periods to that, effect reform only covers the years 2009 to among other things, the period after the This underscores Appendix). A4 in the Table returns (see effect the resilient 2011, the robustness of our results. also persists if only gifts are we can show effect In addition, that the treatment the standard Although the sample size is smaller and considered in the analysis. β effect treatment the p-value of the estimated errors are larger,

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

400 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

401 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution THE PRESENCE OF TAX PLANNING IN THE INHERITANCE THE INHERITANCE IN PLANNING TAX OF PRESENCE THE STATISTICS TAX In 2018, out of the remaining inheritance volume of roughly 85 billion euro, busi- inheritance In 2018, out of the remaining This exempted from taxation. euro were exempted ness assets of about 40 billion poten- estimated the of bound lower the of percent 20 reflects volume inheritance volume of 200 billion euro. Furthermore, personal tax allowances tial inheritance of euro (equal to 10 percent 20 billion the tax base by approximately decreased actual of the base is only 13 percent tax preliminary Thus, the euro). 200 billion years 10 the last within inheritances. preceding However, volume. inheritance euro billion 10 by 2018 in base tax the increased hand, at inheritance the before tax average an implies (which euro billion 35 about of base tax final a in resulting statistics The euro). billion 6.7 to amounts revenue tax as the of 19 percent rate refer to 194,000 inheritance cases. Regarding the observed tax base, the public inheritance and gift tax statistics dis- statistics tax gift and inheritance public the base, tax observed the Regarding for businesses. exemptions and after-tax before- volumes between the tinguish euro for any deductions of 84.7 billion tax base before Therefore, the statistical vol- years 2014 to 2017 the In the volume. inheritance actual 2018 was below the year. ume was roughly 100 billion euro every Since inheritance cases below the threshold for personal tax allowances and thus threshold for personal tax allowances cases below the Since inheritance and gift statistics, the tax base do not enter the inheritance without any tax liability estimate Studies that volume. lower than the actual is substantially in them named billion 200 and 400 to between put it for Germany volume inheritance annual the distortions at the top in the from rich-lists to correct for euro using information 2016; Thiemann, Bach and and Grabka, 2017; (Tiefensee survey data underlying of uncertainty shows the This range 2014). 2012; Brunner, Braun, 2015; Schinke, any estimates. 4 some indicate 3 chapter of analysis data survey the from effects estimated The The uncertainty to the reform 2009. in response planning behaviour kinds of tax as effects to induce pull-forward tax law seemed new provisions of the about the in cases of course, most likely which can appear, of bequests well as suspensions assets that has of to the relocation be attributed would Other effects of donation. of source latter This made. being bequest of a advance in time certain occur a to tax plan- for donor indications But is hard to observe in the data. tax base effects statistics gift and inheritance public with the over time ning can be evaluated apply to this data. some restrictions Office, 2019a). However, (Federal Statistical 5 6 igure igure Source: Federal Statistical Office (2019a); own calculations. Federal Source: F and gifts (in %) Personal tax allowances divided by inheritances Source: Federal Statistical Office (2019a); own calculations. Federal Statistical Office (2019a); Source: tax exemption for busi- from 2007 to 2018, the degree of Regarding the time period ness assets with respect to the observed tax base (before deductions) significantly by the reformThis was mainly induced 5). increased from 14 to 48 percent (Figure This recent reform in 2016. the trend was interrupted by the in 2008. However, of the reforms in 2008 and 2016.development is in line with the general evaluation for business assets is much higher in terms the degree of tax exemption Interestingly, used in order toThis indicates that gifts are strategically of gifts than inheritances. benefit from the tax exemptions for business assets. In the case of death, it is, natu- By transferring business assets not possible to use the exemptions strategically. rally, tax burden. Besides this, lower the effective within a family by gifts, it is possible to non-businessto convert incentive an that donors have mind in borne be should it future performance might be negatively the assets to business assets. Interestingly, a firm to any family member (Perez-Gonzalez, 2006). by bequeathing affected F (in %) and gifts by inheritances divided exemptions Tax

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

402 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

403 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - - - - 7 igure While the overall average tax rate has increased in the last 10 years (Figure 7), the While the overall average tax rate has increased in the last 10 years (Figure 7), tax rate which is referred to as tax income divided by the total value effective is due to the higher degree of tax exemp This before any deductions, has halved. age has slightly fluctuated over the years which might be due to the volume of with the tax rate in accordance a higher or lower that determines each inheritance is there Figures above, in the observations with the progression (Figure 7). In line for and that for inheritances tax rate the average between difference a remarkable gifts are strategi that result supports the hypothesis Again, this descriptive gifts. cally used to minimize the tax burden. tions for business assets from 2009 to 2015. In the course of the reform in 2016, for business assets were since tax exemptions has risen again the percentage and gifts has The gap between the numbers for inheritances restricted (Figure 8). remained stable over the years. The average tax rate for total inheritances and gifts, i.e. tax revenue divided by the and gifts, i.e. tax revenue divided by The average tax rate for total inheritances final tax base, amounted to 19 percent in 2018 as mentioned above. The percent Source: Federal Statistical Office (2019a); own calculations. Source: Average inheritance tax rate - Tax revenue divided by the final tax base (in %) divided by the revenue tax rate - Tax inheritance Average F Meanwhile, personal tax allowances for family members range between 23 per range between members family for tax allowances personal Meanwhile, cent (2008) and 37 percent (2018) in terms of the total value after tax exemptions exemptions tax after value the total in terms of (2018) percent and 37 (2008) cent other words, In inheritances. and preceding is reduced by 23 the taxable amount the between The gap allowances. tax personal to due respectively 37 percent and tax regarding that than smaller is much gifts and for inheritances percentages of course the in widened has recently it assets. However, for business exemptions rate was in 2016. For gifts the the reform while it was 46 percent in 2018, equal to that gifts are strategi also indicates This (Figure 6). 32 percent for inheritances - effec the minimize to thus, and, allowances tax maximize to order used in cally after the recent reform. tive tax burden especially 8 igure 5.1 GENERAL REFORM OPTIONS FOR THE INHERITANCE AND GIFT TAX AND GIFT THE INHERITANCE REFORM OPTIONS FOR 5.1 GENERAL principles fundamental two the as equity and efficiency of background the Against on jobs effects a well-designed tax law is needed, to prevent negative in tax policy, by taxed assets created taking always means tax An inheritance and investments. sug- necessarily does not This taxation. double to leads Thus, it always income. of consideration careful the rather taxes, of inheritance idea the gest neglecting between trade-off The activities. economic in distortions prevent to levy any equity and efficiency is evident. that high (and progressive) tax rates one could argue From an equity perspective, would be a tax allowances and tax exemptions personal with rather restrictive this addressed in be to need issues that some are there But design. tax favourable 3.1, the tax design of a high and progres- in chapter mentioned As already context. which would sive tax rate alone does not necessarily reduce wealth inequality are there if bequests. However, receive and how many inheritors on which depend the possible rev- such a tax could maximize behavioural effects, no or only small or could wealth among households enue from inheritances and redistribute effects, behavioural With of public institutions and services. improve the quality the efficiency loss would be high in such a system. The reasons for that are 5 PROPOSALS FOR A SUSTAINABLE INHERITANCE TAX DESIGN TAX INHERITANCE SUSTAINABLE A 5 PROPOSALS FOR tax law in Germany has always been a complex In conclusion, the inheritance seem responses behavioural the since neglected be cannot losses Efficiency issue. tax law designed of whether a better This raises the question to be rather large. issues. equity hampering without efficiency tax of degree higher a facilitate could of degree high a with law tax inheritance the of reforming challenge the Hence, efficiency and equity will be addressed. Source: Federal Statistical Office (2019a); own calculations. Federal Statistical Office (2019a); Source: F Effective inheritance tax divided rate revenue by - the Tax total value any before (in %) deductions

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

404 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

405 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - -

1 Under the current German regime, tax payments can be extended by 7 years but by applying an interest rate an interest by 7 years but by applying be extended can payments tax regime, German current Under the 1 of the Europe- policy interest current Due to the rates. to market which is far too high compared of 6 percent an Central Bank, an interest-free deferral would be appropriate. Thus, Afrom broadan taxefficiency base perspective, (no the picture is different. rather low personal and self-used real properties and exemptions for businesses and extensions for rates (2 to 10 percent for close relatives) allowances), low tax tax (SVR, 2009: for a well-designed inheritance payments are often recommended Houben and 2015; Institut der Steuerberater, 191f; Deutsches wissenschaftliches a regime is at least considered not to beAt the same time, such Maiterth, 2011). pay- extensions for tax Yet, all heirs pay their (fair) shares. entirely unfair since of inherited business to avoid any solvency issues in the case ments are reasonable below 10 percent could tax liability even of a rather small rate assets. Otherwise, a Austria, for example, need to sell business parts or assets. In cause illiquidity or the reintroduction of the tax by allowing anthe Social Democrats have proposed the 2014: 191). extension for payment of 10 years (Steuerreformkommission, straightforward. The potential testator has a higher incentive to consume instead instead to consume incentive higher has a testator potential The straightforward. of assets the relocation terms of in evasive reactions important, Most of saving. - tax by mov the inheritance It is possible to circumvent to grow. can be expected for evidence slight 3 gives Chapter in analysis data The country. another to ing tax the inheritance to change in responses since behavioural these correlations, similar extents. and France to Austria, in Germany, can be observed Presuming a broad tax base with no exemptions, the design of the tax rates is key rates of the tax design the no exemptions, base with Presuming a broad tax tax rates a rate, i.e. the (nominal) Today, equity. for the perceived tax the Furthermore, in Germany. is in place volume, inheritance the with increase with the parties as it decreases between unrelated rate is higher for inheritances degree of relationship. Most German in economists are, favour however, of a flat 2017; al., (Dorn et business sector for the exemptions tax any without model tax transpar more and simpler be would model tax flat A 2016). Thiemann, and Bach There is a certain trade-off between equity and efficiency. A (low)There flatis taxa is certain sup- trade-off between equity and efficiency. posed to minimize and would strengthen the tax efficiency, but a non- regarding especially revenues tax higher to lead would rate tax progressive sensitive to tax planning. Generally, business assets which are not or only slightly of business exemption no or very little base, i.e. of a broad tax a combination reform in A any distortions. to minimize assets, and low tax rates is supposed requires two substantial rate tax low rather and a base tax broad of a favour for business First, the tax exemptions tax law. changes in German inheritance allowances must be at least reduced. assets must be cut. Second, personal tax current Such a reform – by preserving the as not fair. is often regarded but it ent, compa revenues – would result in higher tax payments for heirs of medium-sized assets would have to pay less than under the business nies, while heirs of large This would be the price for a trans- 2017). current system (Beznoska and Hentze, parent and understandable tax law. 8.3 0.19 0.11 20 % 14.9 4.5 0.10 0.06 15 % 11.2 In billion euro per year - - 7.5 0.8 In percent of total hours worked 10 % 5 THE IMPLICATIONS OF A TAX SHIFT AWAY FROM LABOUR TO TO LABOUR FROM AWAY SHIFT TAX A OF IMPLICATIONS THE AND GIFTS INHERITANCES able Flat tax rate Tax revenue Tax Difference to status quo to status Difference Estimated labor supply responses for a revenue-equivalent a revenue-equivalent for supply responses Estimated labor of the Women Men Note: Labour supply effects are evaluated at the median of the income distribution. Note: Labour supply effects are Federal Statistical Office data (2019a); 2018 GSOEP (v34); Source: labour supply model from Stockhausen (2019); own calculations. The additional tax revenue can be used to flatten the progressive income tax , part of the working population. tax rates for a large which means to cut the marginal In our microsimulation model (Stockhausen, 2019), such a reform can be simulated on micro data of the German Socio-Economic Panel (GSOEP) to compute labour Therefore, the second-tax bracket of the for the population. supply effects T reform and labour supply effects of a flat tax Estimated revenue 5.2 of of inheritances to a volume business assets amounted for exemptions tax The 19 to 2018 was equal in rate tax average The in 2018. euro 40 billion roughly taxing the tax rate could mean and cutting the the tax base percent. Broadening of 10 at a tax rate in reality) were exempted euro (which 40 billion additional to additional lead This would of 19 percent). average the actual of (instead percent base in tax actual the time same the at euro. However, revenues of 4 billion tax a to leading of 19 percent) (instead 10 percent of rate a at taxed 2018 would be words, a euro. In other 3.2 billion than more bit of a little revenue in tax decrease in favour of reform to only lead would rate the cutting base and tax the broadening to amounts euro 0.8 billion plus of less than The revenues. additional negligible tax revenue in Germany. 0.1 percent of total order in percent 10 than higher rate tax a of favour in argue could one Of course, are as distortions is strongly limited the extent But effect. to boost the revenue would percent 15 of rate tax flat a instance, For rate. tax the with grow to supposed revenues, a tax rate of 20 percent to 8.3 billion lead to 4.5 billion euro additional euro more 5). (Table However, this only refers to the first-round effects without eva- for a rather high tax rate, increasing Especially adjustments. any behavioural At the same, a low are likely which would shrink the revenue effect. sion activities the tax base by reducing activities aimed at evasion. flat tax rate might enlarge

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

406 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

407 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

2 9 igure This implies a shift of the beginning of the third tax-bracket according to the 2019 income tax tariff from from tax tariff This implies a shift of the beginning of the third tax-bracket according to the 2019 income 2 The distributional effects of the tax cut lie in a range between 0.1 percent and 0.25 0.1 percent between in a range lie tax cut of the effects distributional The higher with increases effect The 9). (Figure gross income of taxpayers’ percent this mean, At the again. slightly decreases and then decile seventh to the income highest The per taxpayer. of about 170 euro per year relief corresponds to a tax Note: Deciles of the distribution of household’s equivalised gross income. equivalised gross Note: Deciles of the distribution of household’s model supply labour (2016); Beznoska model microsimulation (v34); 2018 data GSOEP Source: Stockhausen (2019); own calculations. from Distributional and labour supply effects of a cut in income tax of 8.3 billion euro worked hours total of percent in and relief) (tax income gross of percent in (2019, (labour supply) F progressive-linear income tax tariff is smoothed to obtain a revenue-neutral reform. a revenue-neutral to obtain is smoothed tax tariff income progressive-linear 14,254 euro of taxable income per year to 15,400 euro (15 percent scenario) or 16,400 euro (20 percent sce- or 16,400 euro (20 percent scenario) (15 percent to 15,400 euro year per income 14,254 euro of taxable nario), respectively. The reform lowers the marginal tax rates over a wide range of taxable income by up income of taxable a wide range rates over tax the marginal lowers The reform are very low. effects simulated labour supply the points. However, to 3 percentage fromburden tax the of shift the distribution, income the of median the at Evaluated the income tax to the inheritance tax in the scenario with a flat rate of 15percent For men, theworked for women. of total hours increase of 0.1 percent leads to an 20the scenario with a of 0.06 percent. In with an increase is even smaller effect percent flat tax,the effects amount to 0.19 percent for women and percent 0.11 for of 25,000 corresponds to an increase in employment Thus, the latter scenario men. (Federal Statistical employed women and about 21,000 men full-time-equivalent Office, 2019b). The reason for these small effects is, on the one hand, the already part-time Since women have a higher in Germany. high employment situation cut because of higher tend to react more than men to a tax employment rate, they the stems from In general, most of the predicted effect supply. potentials in labour inheritance hand, the additional tax revenue from the On the other intensive margin. to allow for significant tax cuts in the income tax. tax is just too small FURTHER REVENUE POTENTIALS OF THE INHERITANCE INHERITANCE THE OF REVENUE POTENTIALS FURTHER AND TAX GIFT 5.3  in terms of increasing the tax As of taxing business assets is limited the potential inheritance the From interest. special of are allowances tax personal the revenue, - the statis which do not enter any inheritances that it can be deduced tax statistics, guestimates the to Referring allowance. tax personal respective the below are tics above), a between 200 and 400 billion euro (see volume of the annual inheritance below to inheritances euro must be allocated to 300 billion of about 100 volume a appropriate, as euro billion 400 of volume the Acknowledging thresholds. the be would This euro. billion 40 of revenues tax mean would percent 10 of rate tax of less than 7 billion to the current tax revenue compared a substantial increase tax revenue (32 of part of the additional the main it is obvious that euro. However, business assets without to taxing be allocated euro can 1 billion euro; 33 billion i.e. below the personal inheritances, small taxing results from any tax exemptions) tax allowances. Thus, increasing the revenues significantlycould reform Such a way. broader much a in properties family taxing things, other requires, amongst be perceived as being unfair. tax reform an inheritance that it follows Based on Bach et al. (2014), for instance, of degree of the regardless of 100,000 euro allowance tax personal a general with tax rate of for business assets and a proportional no tax exemptions relationship, Applied to the tax rev- of 20 percent. 10 percent would lead to a revenue increase euro for the price revenues of 1.4 billion additional in 2018 this would mean enue volume (at least for close family members). restricted allowance of a substantially 20,000 to 200,000 euro between to a range personal tax allowances the By altering 25 would be about the revenue increase depending on the degree of relationship increase the for reason main The 2018. to respect with euro billion 1.7 i.e. percent, from 500,000 members family for close allowance tax personal is the reduced be would such a reform unsure whether than more It is to 200,000 euro. euro - consti real estate would effectively by the public since most transfers of accepted tute a tax event. and not inheritances. referring to gifts of this calculation, There is one restriction cases the tax, inheritance the use gifts to circumvent can individuals rich As even families. do not only refer to middle-class below the personal tax allowances wealthy for rather privilege tax as a be interpreted has to tax gift the Therefore, However, times. households that can fully use the personal tax allowances several period of 10 years in thresholds and the time by the volume is restricted the total which all inheritances and gifts are cumulatively considered for tax purposes. labour supply responses for women are found in the middle of the income distri - the income of in the middle are found for women supply responses labour the distribution. along smooth relatively are effects supply labour Men’s bution. Exceptions are the first decile, where especially singlemen react more strongly, the of households. However, types all in low responses with decile tenth the and small. are overall rather of the effects magnitudes

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

408 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

409 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - 6 CONCLUSION AND OUTLOOK 6 CONCLUSION From a fiscal perspective, the inheritance tax has never played aEven after been intensive. has always debate the political However, majorGermany. role in No ideas for tax remains complicated. several reforms the German inheritance of treatment tax The successful. been have model, flat-tax a by e.g. simplification, tax reform Therefore, an inheritance business assets is always subject to litigation. is reasonable in terms of lower assessment costs and higher How- tax efficiency. taxa- in inheritance households to changes responses of private behavioural ever, of such effects The is designed. law if a new inheritance be considered should tion testa of donors and part on the planning by tax caused mainly are which reform, a Currently, reform to broaden the tax base and cut the tax rates is often proposed. reform to broaden the tax base and cut the tax rates is often proposed. Currently, The fair shares. heirs pay their all and ensure that complexity This would reduce the tax burden could be to minimize to to which gifts are used in order extent reduced by introducing a flat tax model. Long term interest-free deferrals would issues in the any solvency in order to prevent in this regard aspect be an important case of inheritance. tors, can be large as shown in the difference-in-difference analysis in chapter 3. chapter in analysis difference-in-difference the as shown in large tors, can be burden tax the reduce to efforts great make donors as distortions reflect also They of their heirs. From a German perspective, there are good reasons for lowering the relatively good reasons for lowering the are there From a German perspective, of taxation high rather from suffers market labour The labour. on burden high shift to plausible seems it background this Against incomes. middle low- and even in effects economic positive since wealth to labour from partly burden tax the and Altzinger 2019; Commission, (European expected be of growth can terms 2013). Humer, What lessons can be learned from this? The most striking result is that the poten- is that The most striking result from this? learned lessons can be What tial of the inheritance tax to finance public needsor to lower the tax burden on labour are clearly limited unless the personal allowances are to labour burden from tax the shift to used be could increase small any However, significantly cut. as and income tax are correlated, tax Inheritance wealth in terms of inheritances. in the of the inheritor as a tax on income tax can be interpreted an inheritance the Therefore, gains). increase in some asset classes (windfall sense of a net asset wis- (Deutsches tax income the of pattern the by caused gap a fills tax inheritance 2015: 9). der Steuerberater, senschaftliches Institut In summary, the calculations reveal that not limiting exemptions for business for business exemptions limiting that not reveal the calculations In summary, revenue. tax inheritance the increasing to key are allowances personal but assets, among approach be a common will there than unsure whether it is more However, house”). Of (“grandma`s inheritances rather small to tax parties political the be could but zero to cut be to have do not allowances tax personal the course, while reform a such for support political the increase could This lowered. slightly be generated. revenues could still additional

- - per on depends This inequality. wealth increase se do not Disclosure statement Disclosure by the authors. No potential conflict of interest was reported As a consequence of introducing a flat tax modelwith a broad tax base, the tax for larger decrease and increase generally would inheritances smaller for burden In addi- tax. inheritance of the aspect equity the not strengthen This would ones. inheritances tion, - distri net wealth in the the heir of position the for example preconditions, several is and reducing inequality tax for equity of the inheritance The importance bution. by politicians. as is partly presumed not as high tax personal the unless not likely revenues are in tax increases Any substantial of taxpayers to those receiv cut, expanding the circle allowances are substantially gifts and inheritances from the tax revenue increasing While bequests. ing smaller economic increase labour might lowering the tax burden on and simultaneously the limited revenueefficiency, potential of the inheritance tax confines the- possi shift away from a tax shows that analysis Our simulation a reform. of such bilities level. a marginal supply only at labour would increase to inheritances labour increase evasion activities high, set rather rates are tax if inheritance Additionally, on labour demand. negative effect which might have a In conclusion, a reform towards a flat tax model could improve tax efficiency by The not fiscalhampering expectationsequity. of such a reform should not be too the inherit on labour by increasing high as the potential to lower the tax burden rather limited. ance tax revenue is, at least for now,

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

410 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

411 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - Ameri- DIW Politikberatung Der , 42, pp. Betrieb , (3), pp. 199-218. https://doi. , 4-5, pp. 41-48. The Quarterly Journal of Eco- , 60(1), pp. 47-57. MPIfG Discussion Paper, No. 16(8). MPIfG Discussion Paper, . Studie im Auftrag der vbw. . Studie im . Discussion Paper. Wirtschaftsuniversität Wien. Wirtschaftsuniversität . Discussion Paper. , No. 32. IW-Kurzbericht , 106(5), pp. 656-661. https://doi.org/10.1257/aer. DIW Economic Bulletin , 67(4), pp. 648-660. https://doi.org/10.2307/1924810 , 67(4), pp. Perspektiven der Wirtschaftspolitik Bach, S. [et al.], 2014. Aufkommens- und Verteilungswirkungen von Refor Verteilungswirkungen und Aufkommens- Bach, S. [et al.], 2014. Schenkungsteuer. und Erbschaft- die für malternativen kompakt, No. 83. Low Despite Revenue Tax A., 2016. Inheritance Thiemann, Bach, S. and in Inheritances. 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Die T., Beznoska, M. and Hentze, Sicht. aus ökonomischer Unternehmensnachfolge die 2433-2437. schlecht Flat-Tax-Modell 2017. Erbschaftsteuer: T., Beznoska, M. and Hentze, für kleine Unternehmen. Beznoska, M., 2016. Dokumentation zum Steuer-, Abgaben- und Transfer- 27. . IW-Report IW Köln (STATS) des Mikrosimulationsmodell M., 2018. Die Beznoska, M., Niehues, J. and Stockhausen, Vermögensver teilung im internationalen Vergleich Bönke, T., Werder, M. and Westermeier, C., 2017. How shape inheritances Westermeier, M. and Werder, T., Bönke, comparison. Economics An international wealth distributions: Letters, 159, pp. 217–220. https://doi.org/10.1016/j.econlet.2017.08.007 of Bequests Role The 2016. T., C. Kreiner, and W. Boserup, S. H., Kopczuk, Records. Wealth Danish from Evidence Inequality: Wealth Shaping in can Economic Review p20161036 Braun, R., 2015. Erben in Deutschland 2015-24: Volumen, Verteilung und Altersvorsorge. . Deutsches Institut für Verwendung - Steu eines optimalen – Bestandteil J. K., 2014. Die Erbschaftsteuer Brunner, ersystems? org/10.1515/pwp-2014-0019 Bundesministerium der Finanzen, 2019. Kassenmäßige Steuereinnahmen 1991 - 2018. nach Steuerarten in den Kalenderjahren 2006. Leitsätze Bundesverfassungsgericht (BVerfG), zum Beschluss des 10/02. Ersten Senats vom 7. November 2006 - 1 BvL 5. 4. REFERENCES 1. 2. 3. 6. 8. 9. 11. 7. 10. 13. 12. 14. 15. 16. 17. , - - . , No. 19/214. ECB Working , Paper Vierteljahrshefte Vierteljahrshefte zur , 18, pp. 1-139. . , 70(1), pp. 33-40. . Bevölkerung und Erwerbstätigkeit – Erw- , 1, pp. 1–21. https://doi.org/10.1515/zfwp- , 13(2), pp. 151. . , 84(4), pp. 772–793. https://doi.org/10.1257/ , 84(4), ifo-Schnelldienst ECB Statistics Paper Series ECB, 2016. The Household Finance and Consumption Survey. Results from Survey. The Household Finance and Consumption ECB, 2016. the second wave. Elinder, M., Erixson, O., Waldenström, D., 2018. 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public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

412 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

413 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - - Paris: Paris: DIW Wochenber . Jahresgutachten 2009/10. Demographic pp. 33(18), , Research IZA Discussion Papers Series, No. 11120. Discussion IZA Capital in the Twenty-First Harvard Century. Cambridge: , 5, pp. 1559-1588. , 12(4), pp. 439-468. https://doi.org/10.1007/s10888-013- SOEPpapers on , No. Multidisciplinary Panel Data Research Economic Economic Policy Reforms 2019: Going for . Paris: Growth , 5, pp. 1851-1886. , 27, pp. 565-570. 9261-8 change on of demographic The impact B., 2015. Wagner, Zagheni, E. and bequests. via transfers intergenerational man Bequest Tax. man Tax. Bequest . 2014 Steuerreformkommission, 2014. Bericht der Steuerreformkommission Stockhausen, M., 2019. Arbeitsangebotsmodul zum - IW-Mikrosimulations 13. 1.0, IW-Report, Dokumentation Version modell STATS. of Quality – Data Wealth M. M., 2016. Comparing A. and Grabka, Tiefensee, HFCS. Survey the Research https://doi. Methods, 10(2), pp. 119-142. org/10.2139/ssrn.2533371 dür in Deutschland A. and Grabka, M. M., 2017. Das Erbvolumen Tiefensee, größer sein als bisher angenommen. Viertel um gut ein fte icht of and the distribution 2014. Inheritances M., E. N. and Gittleman, Wolff, boom? Journal inheritance wealth or whatever happened to the great of Eco- nomic Inequality 525-534. https://doi.org/10.4054/demres.2015.33.18 University Press. Multi- Mortality A to 2009: 1911 in Germany Schinke, C., 2012. Inheritance Approach. plier 462. on Wage Minimum Statutory of Germany’s The Effects 2019. S., Schmitz, , 20(3), pp. Review Economic German Dependency. Welfare and Employment 330-355. https://doi.org/10.1111/geer.12196 Ger for the Evidence Planning: Tax and Transfers Wealth 2017. E., Sommer, Piketty, T. and Saez, E., 2013. A Theory of Optimal Inheritance Taxation. Taxation. Inheritance Optimal Theory of A Saez, E., 2013. and T. Piketty, Econometrica OECD. https://doi.org/10.1787/9789264290303-4-en OECD. OECD. American and Firm Performance. 2006. Inherited Control F., Pérez-González, Review Economic OECD, 2018 . OECD, The Role in and the Design OECD. Taxes of Net Wealth 49. 44. 45. SVR, 2009. Die Zukunft nicht aufs Spiel setzen 47. 43. 46. 48. 40. 41. 42. 38. 2013. T., 39. Piketty, 36. OECD, 2019. 37. 35. 569 829 17,982 99,449 18,347 98,056 -32,747 -19,843 126,104 162,822 -554 -595 -6,994 -4,774 25,151 28,954 36,558 38,897 [95% Conf. Interval] [95% Conf. Interval] [95% Conf. -165,522 -127,219 P>t P>t 0.255 0.380 0.000 0.001 0.001 0.013 0.000 0.005 0.695 0.966 1.14 4.25 3.71 0.39 0.88 3.34 2.81 -0.04 -3.32 -2.49 t-value t-value 350 296 5,805 6,465 15,983 18,443 24,078 37,148 22,243 34,141 Std. Err. Std. Err. -13 137 4,253 3,097 6,604 5,676 Coef. Coef. 68,003 61,604 82,501 95,888 -79,983 -92,682 ) ) 2 2 β β ) ) ) ) 3 3 4 4 β β ) ) 1 1 β β ) ) 0 0 A2 A1

able able Treatment dummy ( Treatment Treatment dummy ( dummy Treatment Observations Observations Age of hh head (β Age of hh head (β Timedy#treatdy ( Timedy#treatdy Timedy#treatdy ( Timedy#treatdy Variable Variable Constant (β Constant (β Time dummy ( Time Time dummy ( dummy Time Note: Germany vs. France, period length = 4 years each, 2 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 2 periods before in 2000-2003, All prices period measured inheritances 2: are 2004-2007, period 3: 2008-2011. impu- using multiple calculated are errors Standard Germany. in place took 2010. Treatment of five imputations. tation estimates from ECB, 2nd wave; own calculations. Source: T estimator L4P2 Results of the difference-in-difference Note: Germany vs. France, period length = 4 years each, 1 period Period treatment. before 1: 2004-2007, All period in inheritances measured 2: prices are 2008-2011. of 2010. Treatment from estimates imputation multiple using calculated are errors Standard Germany. in place took five imputations. ECB, 2nd wave; own calculations. Source: APPENDIX T estimator L4P1 the difference-in-difference Results of

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

414 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

415 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - 668 617 -3,146 18,434 14,408 16,110 89,995 94,349 -11,671 -29,402 106,646 103,324 -413 -307 -5,573 33,026 29,988 35,821 37,553 -90,486 -54,169 -28,189 -69,193 [95% Conf. Interval] [95% Conf. Interval] [95% Conf. -104,646 P>t P>t 0.011 0.335 0.386 0.593 0.032 0.000 0.000 0.000 0.000 0.000 0.697 0.467 0.73 0.39 0.87 4.24 3.95 3.79 4.20 -0.96 -0.53 -2.15 -2.56 -3.50 t-value t-value 247 262 5,097 11,301 18,519 16,847 14,492 18,056 19,985 19,166 16,410 16,771 Std. Err. Std. Err. 102 180 4,981 5,118 4,418 -6,040 Coef. Coef. 61,510 71,233 62,168 70,439 -17,868 -36,169 -51,079 -67,024 ) ) 2 2 β β ) ) ) ) 3 3 4 4 β β ) ) 1 1 β β ) ) 0 0 A4 A3

able able Constant (β Treatment dummy ( Treatment Treatment dummy ( dummy Treatment Constant (β Period 2 dummy Observations Observations Age of hh head (β Timedy#treatdy ( Timedy#treatdy Timedy#treatdy ( Timedy#treatdy Variable Variable Period 1 dummy Age of hh head (β Time dummy ( Time Time dummy ( dummy Time Note: Germany vs. France, period length = 3 years each, 4 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 3 years each, 4 periods before 1997-1999, period 2: 2000-2002, period 3: 2003-2005, period 4: 2006-2008, period 5: 2009- Standard Germany. in place took Treatment 2010. of prices in measured are inheritances All 2011. five imputations. calculated using multiple imputation estimates from are errors ECB, 2nd wave; own calculations. Source: Results of the difference-in-difference estimator L3P4 Results of the difference-in-difference ed using multiple imputation estimates from five imputations. estimates from ed using multiple imputation ECB, 2nd wave; own calculations. Source: T Note: Germany vs. France, period length = 4 years each, 3 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 3 periods before 1996-1999, period 2: 2000-2003, period 3: 2004-2007, All period inheritances 4: 2008-2011. calculat are errors Standard Germany. in place took Treatment 2010. of prices in measured are T Results of the estimator difference-in-difference with additional period dummies L4P3 - 2,099 1,903 8,075 2,975 13,102 80,118 10,212 88,007 142,923 199,039 -45 -162 3,764 -1,882 -17,887 -12,181 -21,594 -16,697 [95% Conf. Interval] [95% Conf. Interval] [95% Conf. -211,519 -156,395 P>t P>t 0.762 0.149 0.069 0.059 0.039 0.054 0.483 0.182 0.093 0.062 1.44 2.07 1.87 1.68 1.92 1.34 -0.30 -1.89 -1.82 -0.70 t-value t-value 577 497 7,905 8,114 23,540 56,015 40,648 35,500 51,256 26,692 Std. Err. Std. Err. 969 929 1,585 1,906 -5,691 -2,392 Coef. 98,578 35,655 33,968 73,343 Coef. -76,710 -101,722 ) ) 2 2 β β ) ) ) ) 3 3 4 4 β β ) ) 1 1 β β ) ) 0 0 A6 A5

able able Treatment dummy ( dummy Treatment Constant (β Constant (β Observations Age of hh head (β Age of hh head (β Age of hh head Timedy#treatdy ( Timedy#treatdy ( Timedy#treatdy Variable dummy ( Time Variable Treatment dummy ( Treatment Observations Time dummy ( dummy Time Note: Germany vs. France, period length = 4 years each, 2 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 2 periods before in 2000-2003, All prices period measured inheritances 2: are 2004-2007, period 3: 2008-2011. impu- using multiple calculated are errors Standard Germany. in place took 2010. Treatment of five imputations. tation estimates from ECB, 2nd wave; own calculations. Source: T using gifts only L4P2G estimator Results of the difference-in-difference Note: Germany vs. France, period length = 4 years each, 3 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 3 periods before 1996-1999, period 2: 2000-2003, period 3: 2004-2007, All period inheritances 4: 2008-2011. calculat are errors Standard Germany. in place took Treatment 2010. of prices in measured are T L4P3G gifts only using estimator of the difference-in-difference Results five imputations. estimates from ed using multiple imputation ECB, 2nd wave; own calculations. Source:

public sector martin beznoska, tobias hentze, maximilian stockhausen:

economics the inheritance and gift tax in germany 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution

416 public sector martin beznoska, tobias hentze, maximilian stockhausen: economics the inheritance and gift tax in germany

417 44 (3) 385-417 (2020) reform potentials for tax revenue, efficiency and distribution - - 3,305 9,102 2,097 -3,441 12,284 35,932 58,379 17,378 19,973 88,680 71,702 71,318 -26,765 107,801 151,322 102,383 105,220 933 323 8,401 2,893 -8,569 17,527 25,845 14,185 37,082 -25,318 -66,020 -50,773 -71,184 [95% Conf. Interval] [95% Conf. Interval] [95% Conf. -102,388 -113,223 -161,042 -149,239 P>t P>t 0.167 0.715 0.095 0.043 0.060 0.042 0.310 0.083 0.001 0.030 0.393 0.006 0.000 0.004 0.013 0.000 0.008 1.67 2.04 2.68 2.03 2.78 3.59 2.99 2.49 4.10 -1.38 -1.88 -1.02 -1.73 -0.36 -3.35 -2.18 -0.85 t-value t-value 452 21,293 29,682 41,919 37,865 38,051 40,394 14,614 10,892 19,262 15,962 18,045 21,593 15,970 14,381 16,015 17,373 Std. Err. Std. Err. 5,118 1,906 1,210 -3,970 Coef. Coef. 29,656 49,616 59,955 57,262 42,944 39,859 71,151 77,108 -29,450 -64,576 -34,731 -15,400 -78,869 -28,646 -70,068 ) ) 2 2 β β ) ) ) 3 3 4 β β ) ) 1 1 β β ) ) 0 0 A8 A7

able able Treatment dummy ( Treatment Observations Variable Variable Treatment dummy ( dummy Treatment Observations Age of hh head (β Period 1 dummy Period 2 dummy Age groups (ref.: 16-30) Age 31-45 Age 46-60 Age 61-75 Age 76+ Constant (β Timedy#treatdy ( Timedy#treatdy Timedy#treatdy ( Timedy#treatdy Time dummy ( Time Time dummy ( dummy Time Period 2 dummy Constant (β Period 1 dummy ed using multiple imputation estimates from five imputations. ed using multiple imputation estimates from wave; own calculations. ECB, 2nd Source: Note: Germany vs. France, period length = 4 years each, 3 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 3 periods before 1996-1999, period 2: 2000-2003, period 3: 2004-2007, All period inheritances 4: 2008-2011. calculat are errors Standard Germany. in place took Treatment 2010. of prices in measured are Results of the estimator difference-in-difference with additional period dummies dummies L4P3AG and age group ed using multiple imputation estimates from five imputations. estimates from ed using multiple imputation ECB, 2nd wave; own calculations. Source: T Note: Germany vs. France, period length = 4 years each, 3 periods before treatment. Note: Period Germany 1: vs. France, period length = treatment. 4 years each, 3 periods before 1996-1999, period 2: 2000-2003, period 3: 2004-2007, All period inheritances 4: 2008-2011. calculat are errors Standard Germany. in place took Treatment 2010. of prices in measured are T Results of the estimator difference-in-difference with additional period dummies only L4P3G using gifts