Over half of people in the Netherlands think inheritance taxes should rise, according to new research by the government’s economic planning agency CPB.
The study, published on Tuesday, combines tax office records with a survey of 4,500 people about the rate they would consider desirable on an inheritance from a parent to a child.
Preferred rates rise sharply with the size of the estate. The median respondent would tax an inheritance of €10,000 at 4%, €100,000 at 11% and €1 million at 25% – and support for taxing larger inheritances more heavily holds across all age and wealth groups.
Most estates untaxed
In practice, most people who inherit pay nothing at all. A tax return is only needed for around 35% of deaths – although those estates account for roughly 75% of all the money passed on.
Even then, the tax office takes about 11% on average. Partners pay almost nothing, because the first €828,035 they inherit is tax free. Children pay nothing on the first €26,230, then 10%, rising to 20% on amounts above €158,669.
The further away the family tie, the higher the rate: distant relatives and non-family members can pay up to 40%.
Family businesses are taxed mor lightly than other forms wealth. The first €1.5 million of a firm passes on tax free, along with three-quarters of everything above it.
The study also looked at why people feel the way they do about the tax. Economic arguments – such as whether it discourages work or saving – made no difference. What mattered was how people think about fairness: their views on inequality, on luck versus hard work, and their trust in politics.
The amounts at stake are growing. Between €25 billion and €30 billion is inherited in the Netherlands every year, around €10 billion more than a decade ago, and the total is expected to keep rising as the post-war generation passes on its wealth. The tax currently brings in some €2.5 billion a year.
In May, the CPB warned that tax breaks for homeowners and family businesses are deepening the wealth divide between Dutch households.
