The tax rate for donor's tax is typically based on what aspect?

The tax rate for donor’s tax is typically based on graduated rates corresponding to the total value of the gifts made. This structure means that as the value of the gift increases, the tax rate applied to that value also increases, reflecting a progressive taxation system. This approach ensures that larger gifts are taxed at higher rates, promoting equity in the tax system by requiring those who can afford to give more to contribute a greater percentage.

Graduated rates are common in various tax systems, as they help to balance the tax burden between donors of varying financial means. The specific thresholds and rates can vary by jurisdiction, but the principle remains the same: higher value gifts trigger higher tax rates, which is a central tenet of progressive taxation.

Other options, such as a fixed rate for all gifts or a flat rate for donations above a certain amount, fail to account for the varying financial capacities of donors and do not support the progressive nature of most tax systems. Additionally, varying rates depending on the recipient may introduce complications and lack consistency, making it less practical and more difficult to administer. This graduated system, therefore, aligns well with broader fiscal policies and social equity goals.