In recent years, it has been rumored that the Shenzhen government has put forward proposals for levying inheritance tax in the reform of the income distribution system reported. The news immediately attracted a great deal of attention in society, and although it seems that it is still some time before the actual implementation of the inheritance tax in the country, it may be time for the rich to start thinking about how to deal with the inheritance tax.
1. What is inheritance tax?
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Inheritance Tax is a tax levied on property left behind after the death of the owner of the property, also known as the "death tax" in the United Kingdom. Inheritance taxes have been recorded as early as the days of the ancient Egyptian, Greek and Roman Empires. The modern inheritance tax was generated in the Netherlands (1598) at the end of the sixteenth century, followed by the Inheritance Tax in England (1694), France (1703), Italy (1862), Japan (1905), Germany (1906) and other countries. The United States introduced a provisional inheritance tax during the Civil War, but did not introduce a graded inheritance tax until 1916. At present, inheritance taxes are levied in almost all developed and many developing countries.
As early as the Beiyang government, the mainland had prepared to introduce an inheritance tax, but it could not be implemented due to political turmoil and frequent wars. In October 1938, the then Nationalist government officially promulgated the Provisional Regulations on Inheritance Tax, and on July 1, 1940, the inheritance tax was officially introduced. After the founding of the People's Republic of China, the State Council promulgated the "Guidelines for the Implementation of the National Tax Administration" in June 1950 when adjusting the taxation, which included inheritance tax as one of the taxes to be levied, but it was not levied due to the conditions at that time. The new tax reform of 1994 listed inheritance tax as one of the possible taxes imposed by the state. In the Ninth Five-Year Plan for National Economic and Social Development and the Outline of Long-term Goals for 2010 approved by the National People's Congress in 1996, it was proposed to "gradually introduce inheritance tax and gift tax".
2. Works of art may be offset by inheritance tax
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Inheritance generally includes movable property and real estate, real estate generally refers to land and housing, and the scope of movable property is relatively wide, stocks, works of art, currency, etc., in the investment products of movable property, the performance of currency is the worst, because the currency will continue to depreciate; In most market economies, the daily maintenance tax on land and houses is very high; Stocks will fluctuate because of the company's performance, and it is difficult to find a century-old undefeated company; Therefore, the rich almost all focus on the investment of art, and the number of works of art has gradually become scarce and precious with the continuation of time, so it has become the best variety of value preservation, appreciation, and heritage.
Most common law countries use art donations to offset inheritance taxes. For example, if a collector donates a work of art to a national public museum or art gallery, the market value of the donated art can be directly offset by the inheritance tax of the corresponding value, so as to encourage collectors to return the treasured cultural relics to the public institution. Collectors who realize their art through auction will also need to pay a commission to the auction house and personal income tax to the tax office, which may not be enough to cover the amount of inheritance tax that can be used to donate the art.
The UK government stipulates that if a taxpayer donates art to a museum in the UK, the market value of the donated artwork can be directly offset against inheritance tax. Since the implementation of the scheme, many art treasures have returned to the collection or exhibition of public museums in the United Kingdom, and the British government has successfully recycled many regular works of art, which has also alleviated the decline in the collection and acquisition capacity of public museums to some extent. The masterpieces exhibited in many museums in the UK originally benefited from individual "donations". The earliest works of the French National Picasso Museum were donated by Picasso's descendants to cover the inheritance tax of the artwork.
It is understood that France, which belongs to the civil law system, has not adopted the practice of donating art to the National Museum to offset the inheritance tax, but to submit the art collected by the deceased to a professional institution for evaluation and then pay the inheritance tax proportionally. If the heirs auction these works of art within three years after the appraisal exceed the original appraisal price, the excess is also subject to inheritance tax.
Is the time ripe for the mainland to levy inheritance tax?
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A country's inheritance tax mainly requires the following conditions:
1. The introduction of inheritance tax requires a certain social foundation. If the people's sense of taxation is not strong enough, they only regard taxation as an obligation, believing that taxation reduces their wealth, so they are prone to resist the collection of inheritance tax, and will find ways to avoid taxation. The mainland government needs to increase publicity on the rights and obligations of taxpayers, emphasizing the rights of taxpayers and the services of government agencies to taxpayers.
2. It is necessary to establish a sound property registration system. In order to determine the scope of property, it is necessary to have a sound system of personal income declaration and property registration. This is the basis for the introduction of inheritance tax and the guarantee for the smooth implementation of inheritance tax. So far, in addition to the real-name system in the deposit and stock markets on the mainland, many other properties have not yet fully implemented the real-name system. Including movable property such as cash and antique artworks, as well as intangible assets such as patents and works, an effective system for declaring and registering personal assets should be established as soon as possible. Nowadays, the media has been calling for a long time for the official asset declaration system to be introduced, and it is not easy to find out the wealth of the rich!
3. Restrict transactions paid in cash. In a country like China, where cash has become the main means of payment in life, it is still very difficult to count a person's cash assets. If the problem of cash payment is not solved, the loophole of inheritance tax avoidance will not be plugged.
4. It is necessary to establish and improve the personal property assessment system. In countries where inheritance tax is levied, the value of the estate is the premise of taxation. The accuracy of the property assessment directly affects the amount of taxation. In foreign countries, in order to collect various types of property taxes, there are generally specialized, authoritative and impartial asset appraisal agencies. Asset appraisal is not yet mature in the Chinese market, especially the appraisal and appraisal market of artworks has no standards and no credibility, if we do not increase our efforts to improve the appraisal and appraisal mechanism, this is bound to become an obstacle to the collection of inheritance tax.
5. The cooperation between gift tax and inheritance tax is required. Gift tax is a supplement to inheritance tax and is established to prevent inheritance tax avoidance by way of gifts before the inherited person's life. If there is no supporting measures such as gift tax, the rich will preemptively donate property to their children or relatives, and the introduction of inheritance tax can only be an empty phrase.
Therefore, in summary, as far as the current domestic situation is concerned, the time for the mainland to implement inheritance tax is not yet ripe and the conditions are not yet in place.
The impact of future inheritance taxes on the art market
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On the mainland, the government has not yet paid full attention to the art market. For example, there are still high tariffs and high value-added tax on works of art. For the development of the art industry in China, there has not yet been a good atmosphere of encouragement for the acquisition and collection of cultural relics and works of art by the state and the overseas return of cultural relics and artworks. It is difficult to judge whether the future Inheritance Tax Law can write in the tax deduction for donated works of art.
Because of the investment preservation and appreciation of art and the future role of inheritance tax, the collection of art by the rich in their lifetime will be conducive to the greater development of the art market. Due to the high threshold for entering art collection and investment, the art appraisal and evaluation system is not sound enough, the proportion and basis of art collected by the rich are still far inferior to those of developed countries, and the imperfect system will cause the early introduction of inheritance tax and various tax avoidance methods, which will restrict the rich's investment in the art market.
Therefore, in the face of the looming inheritance tax, the corresponding growth rate of the art market may not be too fast! The capacity of the art market may not change significantly until the inheritance tax is introduced; Even if the inheritance tax is introduced in the future, the inheritance tax law writes that art donations can be tax-deductible, and its increase in the art market may not be very obvious in the short term!