Inheritance taxation and institutional innovation

pathways to fiscal justice and strengthening the third sector in Brazil

Abstract

This article analyzes inheritance taxation in Brazil, focusing on the Imposto sobre Transmissão Causa Mortis e Doação (ITCMD), highlighting its inefficacy as a redistributive instrument. Its ineffectiveness arises from several factors, including the low maximum tax rate, which is capped at 8%, and the absence of progressivity. The article argues that this tax structure contributes to the perpetuation of wealth concentration and reflects the misalignment of the Brazilian tax system with international distributive practices. The text also links inadequate taxation to the challenges faced by nonprofit organizations (NPOs) in fundraising, such as regulatory barriers and the lack of tax incentives for donations, ultimately weakening philanthropy as a tool for social transformation. Based on the principles of institutional innovation proposed by Mangabeira Unger, the paper takes advantage of the ongoing tax reform context in Brazil to propose revisions, including the reassessment of the “ITCMD’s” maximum tax rate, the progressive increase of the levy, and the introduction of tax incentives for philanthropic donations. To achieve this, the applied methodology consists of a comparative law analysis of the tax systems of countries such as the United States and Germany, which serve as illustrative models and guidance for potential adaptations to the Brazilian context.