A few months from presidential, the latest note * from the Economic Analysis Council (CAE), which castigates French taxation on inheritance, should not go unnoticed. ” We are now in a world where it becomes essential to have inherited in order to access high standards of living. It is a society where we forget the merit of work, judge, severely, Camille Landais, economist at the CAE, co-author of this note. In the 1970s, French people born around 1920 had very little inheritance. Since then, the flow of inheritance has almost doubled in thirty years! “
Through ” estate flow », The CAE, which depends on Matignon but ensures that it has entered into the subject itself, by that means inheritances but also all donations made between relatives during life (declared or not). He starts from a simple observation: after a decline in wealth inequalities after the First World War, “ inheritance once again becomes a determining factor in the constitution of heritage », Observes the CAE. In 2020, in France, 60% of a Frenchman’s wealth comes from inheritance, against 35% at the start of the 1970s.
Inequalities and tax inefficiency
Why does this trend frighten economists? ” With this return of inheritance to heritage, there is now a real danger in terms of equal opportunities », Camille Landais alarmed. Because this inequality is ” birth-based And not on labor income. Thus, according to their data, half of individuals inherit less than € 70,000 in assets throughout their life, while 10% are rewarded with more than € 500,000 and that 0.1% receive 13 million! This ” extreme concentration of inheritance Could translate in the long run into an increase in the concentration of wealth, which is far from good for economic systems. The CAE targets in particular the richest who receive an inheritance 180 times higher!
Another problem, which weighs on the GDP, ” 60% to 65% of the transferred assets escape tax », Informs Camille Landais. And this even though the total flow of annual asset transmissions now represents more than 15% of GDP according to CAE calculations! The French tax system is considered inefficient.
The causes are multiple: the fault of a faulty data collection system within the General Directorate of Public Finances (DGFiP), but also a not so progressive taxation of donations and inheritances, which greatly penalizes indirect online transmissions. (for example from a brother to a sister, from an aunt to a nephew, etc.), and to a multitude of tax loopholes… including “ economic justifications are weak “, According to the CAE.
Life insurance in the sights
The CAE thus has in its sights the multiple existing exemptions: the Dutreil pact (up to 75% of the value of the professional property transferred), the dismemberment of property, which makes it possible to give bare ownership during his lifetime (the only basis then taxable, at only 45% on average, according to the CAE note), and… life insurance, the sums of which largely escape inheritance tax. ” They are either totally exempt or taxed according to an ad hoc scale that does not depend on the family tie », Recalls the CAE. However, in 2019 alone (latest data available), more than 44 billion euros were transmitted via life insurance! The shortfall for the tax administration is therefore enormous. Especially since it is above all ” large estates who use all of the anti-tax systems very aggressively », Notes Camille Landais. A certain lack of knowledge of the population on taxation linked to inheritance even more unbalances the system.
Four pillars
To make the system more egalitarian and less favoring the richest, the think tank proposes a total overhaul of taxation and a reform built on four pillars for ” strengthen the progressivity of the inheritance tax “.
The main thing, and certainly the most revolutionary, would be to put in place a tax on the total inheritance flow received throughout life and no longer on the amount of a transmission at a time T. ” At each transmission, we recalculate the tax rate on all of what has already been received », Explains Camille Landais. Asexample, an heir would pay the same amount of tax if he received 700,000 € at once from one of his parents on his death, or if he received during his lifetime three donations of 100,000 € (which can currently benefit from deductions ) and € 400,000 from his parents on their death. The system, which already exists in Ireland, is defended by the OECD and by the report by economists Olivier Blanchard and Jean Tirole, submitted last June to Emmanuel Macron.
At the same time, an overhaul of the inheritance tax base would be carried out, while eliminating in particular (not surprisingly) the main exemptions or exemptions. Thus the CAE proposes to reinstate life insurance in the scale of inheritance taxes, but also to remove the tax advantages linked to the dismemberment of property. He does not advocate the abolition of the Dutreil pact, because it is economically justified, but an increase in tax controls. Suffice to say that with such a system, there would clearly be an explosion in taxation …
Finally, CAE economists plead for the establishment of a “ guaranteed capital for all “, Paid at 18 or 25,” to limit the most extreme inequalities »In access to training or housing, for example. The note refers to a guarantee paid of up to € 40,000. ” Of course, inequalities are so strong and their problematic complex, this capital for all would only solve part of the problem. », Recognizes Camille Landais.
The inheritance tax will certainly be in all presidential candidates’ programs. The Republicans and the far right agree in wanting to further reduce this tax, while Jean-Luc Mélenchon, unsurprisingly, wants to increase it as much as possible. For the time being, neither Emmanuel Macron nor his ministers have commented on this note.
* “Rethinking inheritance”, note no 69 of the Economic Analysis Council, by Clément Dherbécourt, Gabrielle Fack, Camille Landais and Stefanie Stantcheva, December 2021.