Life insurance, the Dutreil Pact, inheritance taxes... a shocking set of proposals from an NGO

After playing a central role in the tax debate during the elections, inheritance taxes are back in the news. This time, Oxfam is taking up the issue. In its usual tone, the NGO denounces “the tax windfall for the ultra-rich,” referring to “super-heirs (sic) who are heavily favored by the tax system.”
 

Proposals to Reform Inheritance Taxes

Among the proposed solutions, the report suggests implementing a one-time tax deduction of 100,000 to 200,000 euros applicable to each beneficiary over the course of their lifetime, with no possibility of combining such deductions in cases involving multiple donors. Oxfam also calls for a single tax bracket (regardless of the family relationship) with a more progressive structure. However, the published document does not provide further details on the proposed tax schedule.
 

Reinstating Life Insurance in Estates

Beyond these fairly conventional approaches, which have already been discussed in the past by other stakeholders, Oxfam very clearly focuses on two wealth-transfer mechanisms. The first is life insurance. Noting that this provision allows for the tax-free transfer of 152,500 euros, with residual taxation of 20% or 31.25%, the report argues that this framework results in a loss of 4 to 5 billion euros annually to the public treasury (according to the Economic Analysis Council). 

He therefore simply proposes eliminating the specific life insurance exemption and applying the inheritance tax schedule to it. In other words, he suggests treating it as an estate asset like any other.
 

Demonstrating the Need for the Dutreil Act

Another area of concern for the NGO is the Dutreil Pact. As a reminder, this program—which pertains to the transfer of family-owned businesses—allows, under certain conditions, for a 75% reduction in transfer taxes on business assets. “While the government officially estimates its cost at around 500 million euros, this estimate—which has remained unchanged for 10 years!—is being questioned by many experts,” the report notes.

In an effort to promote the transfer of assets to employees, Oxfam is calling for, at a minimum, a cap of 2 million euros on this program, along with “a threshold above which the beneficiary must demonstrate an inability to pay the taxes without an exemption in order to qualify.” According to the report, it might even be appropriate to consider eliminating the Dutreil scheme after assessing its actual effects.
 

What does the future hold for these proposals?

It goes without saying that these are merely proposals put forward by an NGO. While they unsurprisingly echo the ideas put forward by the New Popular Front during the legislative elections, their implementation seems all the less likely in the short term, given that the lack of a majority does not lend itself to radical measures.

Furthermore, it would undermine the stability of the life insurance sector—a 2,000 billion euro industry that fuels the economy—and jeopardize the long-term viability of many companies.

On the other hand, this new contribution to the debate tends to show that a reform of the inheritance framework will be necessary (particularly to benefit low- and middle-income groups), a point on which there is virtually a consensus across the political spectrum.