A leading economist is proposing a significant overhaul of inheritance tax regulations, advocating for a lifetime tax-free allowance of €800,000 for heirs. Stefan Bach, a tax expert at the German Institute for Economic Research (DIW), suggests this change would simplify the system and potentially reduce the burden on less wealthy individuals.
Speaking to “Bild am Sonntag” Bach argued that implementing such a lifetime allowance would exclude many individuals who lack the expertise to effectively navigate the current complex inheritance tax rules. He acknowledged that the reform would likely result in reduced overall tax revenue, but contended that it would promote greater fairness in the system.
The proposal comes in response to a recent suggestion from Tim Klüssendorf, General Secretary of the Social Democratic Party, who also proposed a universal lifetime allowance for inheritance. Bach’s concept specifically addresses the contentious issue of tax-free transfers of businesses, which can often reach sums in the tens of millions or even billions of euros. He believes these substantial transfers currently enjoy excessive privileges, even under the existing “protective needs assessment” process and should be re-evaluated as part of a comprehensive inheritance tax reform.