Why Reinstating an Inheritance Tax Remains a Complex Challenge
Former Tax Authority director Eran Yaakov discusses the challenges of reinstating an inheritance tax in Israel, citing operational hurdles and inequality debates.
The debate over reinstating an inheritance tax in Israel has resurfaced as the government faces growing long-term expenditures. While most OECD member states enforce an estate or inheritance tax, Israel abolished its own estate tax in 1981.
Eran Yaakov, former director of the Israel Tax Authority, explained in a recent podcast interview that while such a tax offers potential benefits—such as reducing economic inequality—it also presents severe operational and structural challenges. "Anyone receiving a tax-free inheritance gains a significant advantage and a different starting point compared to others," Yaakov noted, acknowledging the egalitarian argument.
However, opponents often raise the issue of double taxation, pointing out that the testator has already paid taxes on accumulated wealth throughout their lifetime. Furthermore, implementing an inheritance tax involves complex operational hurdles, including asset valuations and tracking overseas holdings.
"An inheritance tax acts like a net with very large holes, allowing affluent individuals to find ways around it," Yaakov added. Enacting such a policy would require supplementary legislation, such as a gift tax, to prevent asset transfers before death, making administrative enforcement exceptionally difficult.
