By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.
This paper shows that family firms serve as vehicles for inheritance
tax avoidance among the wealthy. Exploiting a tax reform
in Catalonia (Spain) that widened the tax gap between favored and
non-favored assets, I document a shift in inherited wealth toward
family firm equity, consistent with affluent testators channeling
private assets into existing firms before death. Heirs unwind these
positions when the mandatory holding period expires. Linking inheritance
and wealth tax records, I estimate that this behavior reduces
combined tax revenues by 10% annually. Preferential treatment
of family firms may therefore undermine effective wealth taxation
in broad wealth tax systems.
