Half of the heirs in Spain would not pay Inheritance and Donation Tax even if the existing bonuses, which mainly benefit the 10% of the richest households, were eliminated. With this statement, the Technicians of the Ministry of Finance (Gestha), highlight the need to harmonize said tax and limit its bonuses (that favor the minority) to eliminate inequalities, promote equity in the tax system and ensure stronger economic financing.
Currently, many autonomous communities apply discounts of up to 99% on this tax, which practically exempts millionaire inheritances from being taxed. “These measures, which disproportionately benefit an economic elite, leave half of the heirs out of any tax obligation,” they say from Gestha.
And, according to data from the Bank of Spain, the net financial wealth of Spanish households reached 2.3 trillion euros at the end of the third quarter of 2024, 11.7% more than in the same period of the previous year. . This increase, however, is mostly concentrated in the 10% of households with the highest income. “This increase in wealth underscores the “urgency to review the Inheritance and Donation Tax so that it fulfills its redistributive function,” the technicians emphasize.
The Technicians of the Ministry of Finance propose to harmonize the inheritance tax
To avoid these inequalities, Gestha proposes establishing a uniform model for the Inheritance and Donation Tax that limits these bonuses and guarantee greater tax justice. According to the Treasury Technicians, “harmonizing the tax between autonomous communities would contribute to reducing inequality, improving equality of opportunities and strengthening regional public finances.”
This position is not exclusive to Treasury Technicians. Reports from international organizations such as the OECD and the International Monetary Fund (IMF) also highlight the importance of a progressive tax system to curb the concentration of wealth. The IMF, in its April 2021 report, recommended increasing inheritance taxes as an effective measure to combat inequalities, especially after the impact of the pandemic.
And, according to experts,The idea of reforming this tax is not new. Already in 2013, the Lagares Commission proposed establishing a uniform minimum taxation throughout the national territory to guarantee equal opportunities and prevent the disappearance of the tax. More recently, they explain that the White Paper on Tax Reform, prepared in 2022, recommended maintaining this tax, considering it more appropriate to reflect the capital gains obtained by heirs in personal income tax, given that heirs obtain an increase in wealth that, in Consequently, you must pay taxes.
Harmonizing the inheritance tax in all communities would eliminate competition
Gestha also highlights that the harmonization of the tax could resolve problems arising from tax competition between autonomous communities. Currently, communities use these bonuses to attract wealthy taxpayers, which in the long run reduces revenue and perpetuates tax inequality.
“It is essential to reach an agreement to update the regional financing model, blocked for more than a decade, and include measures to avoid this unfair competition”, The Treasury Technicians insist.