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BIOF-lunchdebat 18-12-2009

BIOF-lunchdebat 18-12-2009 Evaluatie van de hervorming van de schenkingsrechten op roerende goederen in het Vlaams Gewest Dr. C. Smolders. outline. Steunpunt fiscaliteit & begroting: research plan The Flemish reform of the gift tax on movables The research question

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BIOF-lunchdebat 18-12-2009

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  1. BIOF-lunchdebat 18-12-2009 Evaluatie van de hervorming van de schenkingsrechten op roerende goederen in het Vlaams Gewest Dr. C. Smolders

  2. outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  3. 1. Steunpunt f&b: research plan Evaluation of Flemish tax reforms The budget of the Flemish Region 2007-2030: Threats and opportunities The impact of taxes on economic growth and employment A1 A2 A3

  4. 1. Steunpunt f&b: research plan A1 Evaluation of Flemish tax reforms 2007 2008 Evaluation of the Flemish reform of the gift tax on movables 2011 2010 Prediction of regional tax revenues

  5. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  6. 2.The Flemish reform of the gift tax on movables • (art.131 §2 W. Reg) : • Since 1.1.2004 separate tax rates for registered gifts of property and movables • Substantial decrease in tax rates for gifts of movables : 3% -> gifts to children, parents, grandparents, spouses and partners 7% -> gifts to all other beneficiaries - Registered gifts are permanently removed from the heritance (suppresion of the so called ‘progressievoorbehoud’)

  7. Gifts at 3%-rate: • Tax income increases with 74% (2004-2006) • Number of files increases with 135% (2004-2006) • Gifts at 7%-rate: • Tax income increases with 32% (2004-2006) • Number of files increases with 84% (2004-2006)

  8. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  9. 3. The research question Did the reform result in an increase in the number of gifts, did it change the timing of gifts, did it change the average amount given? 2. Are there significant differences concerning the profile of donors and beneficiaries before and after the reform? 3. What do tax payers know about the reform? Are they for or against the reform? Did the reform change their attitude?

  10. 3. The research question 4 constituent projects: • Estate planning experts: text analysis of the in-depth interviews with 22 experts • HORIZON-fair Ghent: logit-analysis on the data obtained from face-to-face interviews with 247 donors/potential donors • IVOX-panel: logit-analysis and OLS-regression analysis on the data obtained from an on-line survey (n=1050 potential beneficiaries) • Register offices: Logit-analysis & OLS-regression analysis on the data collected in 9 register offices (n=2686 registered gifts)

  11. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  12. 4.1. listening to experts… Considering • The donor: age 60-65, healthy, relatively wealthy, male, better educated, meant to support children when they start their professional careers or plan to build a house, 80% of the gifts in direct line, most of them are equally divided over the beneficiaries • The gift: intentional gifts: at advanced age, larger average amounts, registered gifts occasional gifts: in the earlier stages of life, smaller amounts, mostly non-registered

  13. 4.1. talking with experts… Considering the effects of the reform: • Clients sooner aware of the benefits of inter vivos gifts • Shift in the type of gift: more registered gifts, less other types of gifts (hansels) • Significantly more gifts of movables • More transfers accompanied by conditions • Wealthy clients are well informed about the reform<>others!

  14. 4.2. talking to (potential)donors… Aim Evaluation of the reform by (potential) donors from low to middle class income groups • Face-to-face interviews with 247 visitors at the HORIZON-fair in Ghent, October 2007 Analysis • Chi²-testen • Logit-regression: GIFT = 1 in case of a donor (n=66) GIFT = 0 else (n=142)

  15. 4.2. talking to (potential) donors… Model GIFT=f(KIND25D,HEALTH,GENDER,EDUCATION, JOB,AGE,HOUSE,STATUS,INCOME,HEAD, MOTIVES,BENEFICIARY,APPREC,KNOWL, PLANNING,INHERIT,FISCAL) KIND25D: the number of children age 25-45 HEALTH: the donor’s health GENDER: the donor’s gender EDUCATION: the donor’s educational degrees JOB: the donor’s job AGE:the donors’ age group HOUSE:house ownership

  16. 4.2. talking to (potential) donors… Model GIFT=f(KIND25D,HEALTH,GENDER,EDUCATION,JOB,AGE,HOUSE,CSTATUS,INCOME,HEAD, MOTIVES, BENEFICIARY,APPREC,KNOWL,PLANNING, INHERIT,FISCAL) CSTATUS: civil status INCOME: household income level HEAD: the number of contributors to the household’s income MOTIVES: motives to give (marriage,birth, illness/accident,altruïsm, children’s housing) BENEFICIARY: have been the beneficiary of a gift APPREC: the appreciation of the tax rates on gifts of movables

  17. 4.2. talking to (potential) donors… Model GIFT=f(KIND25D,HEALTH,GENDER,EDUCATION,JOB,AGE,HOUSE,CSTATUS,INCOME,HEAD,MOTIVES, BENEFICIARY,APPREC,KNOWL,PLANNING, INHERIT,FISCAL) KNOWL:the knowledge concerning inheritance tax law PLANNING: being involved in estate planning INHERIT: whether the subject has been involved in an inheritance procedure lately FISCAL: fiscal considerations

  18. 4.2. talking to (potential)donors… Results: • The probability to give is significantly larger in case of women, age 70+, monthly family income >5000 €, 1 or 2 children age 25- 50, consciously involved in estate planning, altruistic nature • The probability to give is independent of: education, job, tax resistance, knowledge concerning estate planning, health, civil status • The reform is strongly appreciated, but the communication to a much lesser extent • Knowledge of respondents concerning estate planning in general is disappointing

  19. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  20. 4.3. Talking to (potential) beneficiaries… Aim ? knowledge, impact, appreciation of the reform when potential beneficiaries are asked (representative panel, age 25-50) Method & response rate On-line questionnaire with cooperation of iVOX/Indigov (on line from 14/3/08 to 9/4/08) Response rate= 1050 respondents

  21. 4.3. Talking to (potential) beneficiaries… Results • 19% of the respondents received one or more gifts • donor? 76% parents, 13% grandparents, 10% others • type? 50% hansels, 29% deeds, 15% bank gift, 6% not registered • nature? 63% movables, 30% estate property, 7% building lots • amount? 15% < 2.000€, 31% between 2.000 and 10.000€, 25% between 10.000 and 25.000€, 29% > 25.000€ • conditions: 25% of the deeds • Self reported effects on behavior=negligible; the only important effect is on investment in estate property

  22. 4.3. Talking to (potential) beneficiaries… • In 35% of the cases the gift tax was paid because:

  23. 4.3. Talking to (potential) beneficiaries… • in 29% of the cases the reform affected the giving:

  24. 4.3. Talking to (potential) beneficiaries… Results • beneficiary= mostly men, married, owner of a home, healthy, double income family, income superior to 2500 euro, age 45 or older, higher education degree, at least a 4/5 FTE job • Larger gifts to: owners of a home, beneficiaries with larger incomes, better educated, age 40 & older, married, registered deeds • In the post-reform period more gifts to younger beneficiaries and to one-income families • Significant higher amount of conditional gifts in case the beneficiaries are feminine, less educated, less active, living from one income and in the case of larger amounts given

  25. 4.3. Talking to (potential) beneficiaries… Results • Knowledge concerning inheritance taxes and gift taxes = disappointing • Knowledge concerning the reform: 67% never heard of it • The reform is appreciated by a majority of the respondents

  26. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  27. 4.4. studying deeds… Purpose • To obtain an objective view of the profile shifts since the 2004 reform Method • Screening of 3100 deeds available in 9 registration offices, period 2000-2007 • After merging the cases in which one donor registered several gifts, 2686 gifts remained

  28. 4.4. studying deeds… Data

  29. 4.4. studying deeds… Data

  30. 4.4. studying deeds… The profile of the gifts • In 69% of the cases: only one registered donor • in 50% of the cases only 1 beneficiary • larger number of beneficiaries in case of gifts to others (=‘in zijlijn’) • 70% of the gifts = in direct line • The average amount received= 195 197 euro • The average amount given=344 754 euro • The gift in DL > the gift to others • In 50% of the cases, the gift =money • Shares or other financial assets =22% • In 2 out of 10 cases the deed mentions conditions

  31. 4.4. studying deeds… The profile of the donors • On average age 76; only 2% younger then 50 • Donors in direct line are younger (age 74,6 DL<> age 81,5 others) • In case of just one donor: mostly women The profile of the beneficiaries • On average age 46;only 20% younger than 36 • beneficiaries in direct line are younger (age 44 DL<> age 53 others)

  32. 4.4. studying deeds… OLS-regressie; dep.var.= totaal geschonken bedrag

  33. 4.4. studying deeds…

  34. 4.4. studying deeds… • Before and after the reform • Larger gifts • Significantly more registered deeds (!) • More conditions attached • Gifts of financial assets increased • Gifts to others increased • Gifts on later moments in life time

  35. Outline • Steunpunt fiscaliteit & begroting: research plan • The Flemish reform of the gift tax on movables • The research question • The results of the different projects • General conclusions

  36. 5.General conclusions • Concerning the reform • Significant increase in tax revenues • Significant increase in the number of registered deeds • Significant increase in conditional deeds • Significant increase in the number of gifts to others • Significant increase of the amount given • Donors still rather old (average> 70) • Registration of gifts is postponed • Gifts increase savings and moderately stimulate investment in real estate

  37. 5.General conclusions • 2. Considering the knowledge about inheritance tax • Knowledge in general is very disappointing, except for the wealthy group 3. Appreciation of the reform • Donors and beneficiaries are happy with the reform, but not with the official communication considering the reform • Gift taxes on gifts to partners are contested • A majority of the respondents prefers lower tax rates for the highest tax breaks of the inheritance tax

  38. Contact  Steunpunt fiscaliteit & begroting Algemeen secretariaat Hogeschool Gent Campus Schoonmeersen Gebouw C Voskenslaan 270 B-9000 Gent  09 248 88 35  carine.smolders@hogent.be

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