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Discussion paper

This paper argues that an estate tax would make a useful contribution to the government’s tax armoury. The aging of the population means that the tax base is likely to be expanding well into the future. In addition the estate duty is useful because it is levied at a time when the one who accumulated the assets no longer needs them and the beneficiaries have not got used to owning them.


Among OECD countries Belgium raises the greatest proportion of its tax through estate duties. The actual tax scales in the case of Belgium are relatively light in the case of immediate family but quickly climb to a marginal rate of 80 per cent for unrelated beneficiaries. If Australia had a similar revenue effort the yield would be around $5.5 billion per annum but would increase to around double that with the combined State and Commonwealth rates that used to apply in the 1960s.


Estate duties have a major role to play in addressing the increasing inequalities in Australia. The higher we go up the income distribution in Australia the worse has been the increase in the inequality and it is among the very rich that an estate duty would be most effective in addressing intergenerational transfers of wealth.


There are two main types of estate duties: the estate duty itself is normally assumed to operate on the entirety of the estate. On the other hand an inheritance tax would apply to the amounts received by any beneficiary of the estate. We leave the question open but would welcome a debate about the relative merits of these two options.

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