Inheritance tax in China

Yun+Li+Ranran+Wu++Yebo+Shao

【Abstract】With the swift development of economy and the continuous expansion of income gap， inheritance tax has caused extensive concern and heated discussions. Given that there is no inheritance tax in our current tax system， this article makes a thorough summary on the overseas experience. These reference are significant for our future establishment of inheritance tax and its legislation issues， but further studies are also in demand. Both literature research method and comparative method are applied to elaborate major problems and impacts.

【Keywords】Inheritance tax Necessity；Feasibility；Designation；social&economic effects

As a useful method to narrow the gap between the rich and the poor， inheritance tax is universally adopted. But actually there is no inheritance tax in China. With the process of reform and opening up， Chinas economy has developed rapidly and social life has promoted significantly. But at the same time， it has also changed residents income distribution pattern and enlarged the income disparity. Based on this situation， many experts has began to appeal for inheritance tax in our country. And whether to establish inheritance tax or not remains as one of the hottest discussions in society.

After browsing through literature writings at home and abroad， we find experts research on inheritance tax are mainly focus on three aspects， that is analysis on necessity and feasibility of levying inheritance tax、designation of inheritance taxation system and analysis of economic effect and social effect of inheritance tax. Given this， this chapter will make a brief summary of their previous studies.

1.Analysis on necessity and feasibility of levying inheritance tax

For the scholars who do research on the necessity and feasibility of levying inheritance tax， we divides them into two groups according to their different opinions. One holds the point that the time for levying inheritance tax is ripe， and taxation is imperative. The other one thinks the conditions are not well-prepared， so taxation shouldnt be rushed.

For supporters， many positive effects of inheritance tax have been studied and reported. A heavy progressive inheritance tax rate contributes to lightening the wealth concentration trend[1]. Inheritance tax is fair and targeted. With the engagement by tax lawyers with sociological theories of economics， we have the potential to revive “anti-death tax” discourse[2].

For opponents， numerous negative influences have also been investigated. Inheritance tax planning has been increasingly difficult with HM Revenue&Customs paying agriculture ever close attention. As a result， its not wise and economic to levy inheritance tax[3]. Tax incentive does seem to postponed death and finally affect policy decisions， so we should be cautious for inheritance tax， if dont want to bring undesirable behavioral responses[4].endprint

2.Designation of inheritance taxation system

Designation of inheritance taxation system is the key step in solving inheritance tax problems. With mass date and careful analysis， many conclusions have been drew. To enhance economy efficiency， government can increase inheritance taxes while decreasing income taxes[5]. According to the optimal inheritance tax formula， the best tax rate should be as large as 50%- 60% or even higher for top bequests[6].

3.Analysis of economic effect and social effect of inheritance tax

This part can be clarified as two problems： the fairness and efficiency of inheritance tax and the influence extent and scope of inheritance tax.

First problem， experts tend to choosing “equity priority and efficiency consideration” principle. Whether to abolish inheritance tax or reform it， equity is the key point.No matter which approach is chose， “equity first， efficiency consideration” must be taken into account[7].

For the second problem， many investigations have been implemented. Germany's previous inheritance tax doesnt have bad effects on the transfer of enterprises， so Germany's current heritage tax law does not need to give strong incentives to the type of tax. Levying inheritance tax can inhibit saving motives and stimulate consumption.

However， these literature are mainly wrote from the perspective of globalization， not China. Despite foreign countries abundant experience in this field， they are not entirely applicable to us. So further study is essential for establishing inheritance tax in China.

Reference：

[1]Kopczuk W， Saez E. Top Wealth Shares in the United States： 1916-2000： Evidence from Estate Tax Returns. Social Science Electronic Publishing， 2004， 57（2， Part 2）：445-487.

[2]Ann Mumford.Inheritance in Socio-Political Context The Case for Reviving the Sociological Discourse of Inheritance Tax Law.Journal of Law and Society.2007，12（4）：567-593.

[3]Olivia Cooper.Reduce burden on relatives with careful inheritance tax planning.Farmers Weekly，2012， 158（23）.

[4]M.Eliason，H.Ohlsson.Timing of death and the repeal of the Swedish inheritance tax.The Journal of Socio-Economics，2013（45）：113-123.

[5]David N B. Efficiency aspects of increasing inheritance taxes while decreasing income taxes. Applied Economics， 2009， 41（26）：3359-3366.

[6]Piketty T， Emmanuel Saez.A Theory of Optimal Inheritance Taxation. Cancer Epidemiology Biomarkers & Prevention，2013， 81（5）：1851-1886.

[7]Natalie Lee.Inheritance Tax-an equitable tax no longer time for abolition.Legal Studies，2007，4（27）：678-708.endprint