Reduction proposed for inheritance taxes

The French Notaries Congress has proposed halving inheritance taxes for taxpayers under 75 years old, with a limit of 500,000 euros. Above this amount, the current tax rates would stay the same. This aims to encourage the transfer of large inheritances without giving the wealthiest households extra tax benefits.

Current inheritance tax structure

The current inheritance tax in France uses a progressive scale, starting at 5% and rising to 20% for inheritances between 15,000 and 500,000 euros. Under the proposed plan, the highest rate in this range would be reduced to 10%. The reform would change how early transfers are taxed but would not challenge the principle of a progressive tax system.

Proposal developed by notaries

Gilles Bonnet, president of the French Notaries Congress, said the proposal was developed by a team of 10 people over two years. He explained that the idea comes from concerns raised by families dealing with inheritance issues. The notaries argue that this change would better reflect the needs of modern families.

Debate on timing of inheritance tax

The debate focuses on whether it is better to tax inheritances after death or to allow for earlier transfers, even if that means lower short-term tax revenue. Notaries support the latter, believing that early transfers can have positive economic effects.

Massive patrimonial transfer expected

France is experiencing a period of unprecedented patrimonial transfer. By 2040, an estimated 9,000 billion euros could move from the baby boom generation to their descendants. This includes real estate, financial savings, businesses, and professional assets.

Economic benefits of early transfers

Notaries see early transfers as an economic lever. Donations made years before death can allow beneficiaries to use the money immediately for purchases, business ventures, investments, or renovations. This can inject capital into the economy earlier than if the inheritance is settled after death.

Encouraging investment through early access

The proposal is based on the idea that giving younger generations access to existing wealth can reduce financial constraints and speed up investment decisions. However, it is important that the transferred money is actually used for investment rather than just being saved.

Economic and social goals

Gilles Bonnet says the reform could boost the economy and encourage family solidarity. The logic is to change how people view inheritance, encouraging them to give earlier rather than waiting for an inheritance. This could alter household behavior and how wealth is managed across generations.

Expanding family definitions

The French Notaries Congress also wants to change how inheritance tax treats extended family members. Currently, nephews and nieces face higher tax rates than children and grandchildren, with rates reaching 55%. The proposal aims to make transfers within extended families more favorable.

Broader family solidarity

Gilles Bonnet says intergenerational solidarity should not be limited to nuclear families but should include a broader range of relatives. The goal is to allow smoother transfer of wealth while still limiting the reform to prevent it from becoming a tax loophole for the wealthiest.

Challenges in public finances

The debate happens at a time when public finances are under pressure. Reducing inheritance taxes could mean giving up some immediate tax revenue. However, the reform’s supporters argue that lower taxes could lead to more donations and generate indirect economic benefits.