Inheritance in Switzerland increases but its taxation decreases

Inheritance in Switzerland increases but its taxation decreases

The volume of inheritance in Switzerland should reach a record breaking amount of CHF 95 billion in 2020, which represents an estimated average of 11'000 CHF per capita. According to the last report of the Social Change in Switzerland series, inheritance plays a more and more important role in the fortune of Swiss people, since half of this fortune comes from inheritance. In parallel, taxation on inheritance has globally decreased to reach an average of 1.4% against 4.1% in 1990 in a context of fear of tax evasion. With his article, Marius Brülhart shows that this fear is not verified and that inheritance therefore represents an unexploited tax base.

95 billion is the total sum of inheritances in Switzerland projected for 2020. This amount represents half of the country's wealth today. But this large sum is less and less subject to taxation. In Switzerland, inheritance tax has risen to an average of 1.4% compared with 4.1% in 1990, with some cantons having even abolished this tax. The decrease is partly explained by tax competition, which was a strong argument in the various votes on this subject. However, the fear that fortunes will move to another canton if the tax on inheritance is too high is only "presumed", as Marius Brülhart, professor of economics at the University of Lausanne, proves. Tax competition between the cantons has therefore created a significant untapped tax base that could be used to invest in future public services without any major side effects. With a return to the 1990 tax rate of 4.1%, each canton could generate CHF 2.5 billion.

Older and older heirs
The Swiss are receiving their inheritance later and later in life. 60% of the beneficiaries are people over 60. The trend in donations during life is also on the rise and now accounts for 30-40% of the total volume of inheritances. The impact of inheritances on social inequalities has yet to be studied. On the other hand, inequalities in the distribution of wealth are increasing in Switzerland. Today, 1% of the population holds more than 40% of the total private wealth, compared to around 32% in 1982.

The Social Change in Swizerland series documents the evolution of social structure in Switzerland. It is edited jointly by the Swiss Center of expertise in social sciences FORS, the Life course and inequality research Center LINES and the Swiss National Center of Competences in Research LIVES – Overcoming vulnerabilty: Life course perspectives. The goal is to retrace change in employability, family, income, mobility, votation or gender in Switzerland.