In this study we investigate the effects of heritage taxation rules on the economic performance of forestry and, more importantly, on decision making at the forest property level. In Denmark, when a property is handed over from one generation to the next, a heritage tax has to be paid. Apart from this, there is also a tax on the revenue caused by increase in property value during the ownership period.
We analyse how the rotation age in model forest properties with given species composition and initial age structure is affected by these two taxes for a planned generational change every 30 years, compared to an unplanned change and a reference model with no tax on heritage or property value increase (or no change of ownership). As the point of departure we apply model properties including
1000 ha of forest and with species compositions representative for different regions in Denmark. This allows us to analyse the basic conditions for private forest owners’ management, but also to examine whether and to what extent the taxation causes changes in management that are sub-optimal from a social point of view.