Ms Sarah Perret:

There were different points in the Deputy's question. One related to the impact of inheritance and gift taxes on savings and wealth accumulation by individuals. We cited some research in our recent report which shows that inheritance taxes have a small negative impact on savings and wealth accumulation.

It is smaller than for other types of taxes on wealthy individuals. That is one point on the savings disincentives. It is not as strong as some people assume it is, at least according to empirical studies.

If I am correct, the other element of the Deputy’s question related somewhat to the double taxation elements of inheritance and gift taxes. Double taxation is something which comes up a great deal when one discusses inheritance taxes. Double taxation is far from unique to inheritance taxes. In fact, consumption taxes can be viewed as a form of double taxation. One pays VAT most likely with one’s labour income, which has already been taxed. There is double and triple taxation in tax systems. This is not a unique feature of inheritance taxes. The other point is that, economically, what matters is not how many times something is taxed, but the overall level of taxation.

The final point on this double taxation element is that it is always viewed from the perspective of the donor, where the idea is that they have already been paying tax on the income and are now paying tax again. The reality is, however, that most wealth transfer taxes are paid by the recipients. Some 20 out of 24 OECD countries that levy inheritance or estate taxes levy them on the recipient. From the perspective of the recipient, it is not double taxation. There is one layer of taxation from the perspective of the recipient. Again, most wealth transfer taxes in OECD countries are recipient-based. Those were some of the elements I wanted to add by way of response to the Deputy’s question.