A bill filed at the House of Representatives seeks to abolish the estate tax and shift taxation of inherited property to the point of sale through the capital gains tax system.
In filing House Bill 6553, Rep. Raymond Adrian Salceda said under the measure, no family will need to pay property taxes after the death of their relative.
Inherited property will only be taxed when it is eventually sold, at a time when heirs already have liquidity, Salceda said.
The measure instead introduces a Deferred Succession Component within the existing six percent capital gains tax.
Salceda explained that the estate tax no longer reflects the way wealth is structured today.
He emphasized that the tax yields very little revenue compared with the burden it imposes.
“The BIR’s annual estate tax collection is only P14 billion. But the damage it causes is greater. Titles cannot be transferred immediately. The land is left desolate. The bank cannot lend because the paperwork is not in order. This estate is contrary to a sensible cost benefit analysis,” Salceda said.
Based on Salceda’s office study, delayed transfer estate is bad for the economy as it costs around P78 billion.
Salceda said the moral burden is just as significant.
“When a family member dies, do you still have time to take care of the estate? Families are grieving. They need space to recover, not pressure to produce cash for a tax that appears only because someone died,” he said.
Under the bill, heirs will pay no estate tax. Inherited property will only be subject to a deferred charge when it is sold, added to the capital gains tax.
The proposal also simplifies legal and administrative processes.
“The E-CAR for estate transfer will no longer be required. Extrajudicial settlement of estate na lang, kasi wala na rin pong babayaran kaagad sa BIR. So, E-CAR will only be necessary at the time of first sale (Just extrajudicial settlement of estate, because nothing will be paid immediately to the BIR. So, E-CAR will only be necessary at the time of first sale).”
Salceda stressed that the reform is expected to be revenue neutral at the very least and may even increase collections over time as compliance improves and more properties enter the formal market.
“I think Secretary Frederick Go of the DOF will also agree with this. The goal is a tax system that is fair, humane, and easy to comply with,” Salceda noted.
