How high is in reality the revenue from inheritance and gift tax?

  • From Xhulia Likaj
  • Reading duration 2 min

Recent inheritance and gift tax statistics for 2022 initially appear to show increasing tax rates for large fortunes, as well as rising revenues from inheritance and gift tax. However, a closer examination reveals a different story, shedding light on significant tax waivers and declining revenues, especially concerning business assets.

This is what comes out of a critical analysis from researcher Julia Jirmann:

The statistics, released by Destatis in 2023, indicate that inherited assets worth 101.4 billion Euro were assessed in 2022, with taxes amounting to 11.4 billion Euro. This suggests an average tax rate of 11.2 per cent, seemingly higher than in previous years. Additionally, for acquisitions above 20 million Euro, the average tax rate is reported to be 20.9 per cent, significantly higher than before the recent Federal Constitutional Court ruling.

However, the actual tax revenues tell a different tale, as the researcher shows. In 2022, tax authorities collected only 9.2 billion Euro in inheritance and gift tax, over 2 billion Euro less than indicated by the statistics. Furthermore, the 165th tax estimate for 2023 shows a further 4 per cent decrease in revenues to 8.9 billion Euro. These discrepancies highlight the impact of extensive tax exemptions, particularly for business heirs. Since 2009, heirs of business assets have enjoyed tax exemptions of up to 100 per cent. Despite attempts to address this through legislative reforms in 2016, including the introduction of upper limits for exemptions, significant exemptions persist. The so-called ´exemption requirement check` (Verschonungsbedarfsprüfung) allows tax authorities to waive taxes on acquisitions exceeding 26 million Euro based on neediness, significantly reducing effective tax rates.

An inquiry revealed that in 2022 alone, taxes totaling 1.43 billion Euro were waived in 24 cases, significantly lowering effective tax rates. Moreover, subsidies for business transfers have cost the government over 78 billion Euro in foregone tax revenues since 2009, far exceeding previous estimates.

These subsidies primarily benefit the wealthiest individuals, exacerbating wealth inequality. Despite calls from organizations like the OECD to increase asset-related taxes, revenues from inheritance and gift tax continue to decline, contributing to Germany's low asset-related tax revenues compared to other OECD countries.