Monday, March 03, 2008

Two things are certain

They can’t tax you when you’re dead,
So they tax your heirs instead.
And they claim that they are taxing the deceased.
It seems quite clear to me
Through income tax and VAT
That the system is designed to have you fleeced.

Image from here.
I should state from the outset that I have not inherited a stately home or an immense wad of cash, neither have I or anyone I know been obliged to give away nearly half of it to the UK government treasury.

It seems to me that the whole issue of inheritance tax is fundamentally unfair, because it punishes people who have been prudent (or lucky) with money. Putting aside my tax-free expatriate status for a moment, imagine some hypothetical Goat who earned say £20k a year for 40 years and paid tax on it at 30%. That’s a £240,000 lifetime donation to H.M. Gubmint’s coffers. He spent the remaining £560,000 on accommodation, transport, food and living the caprine good life before popping his hooves and leaving a house worth say £300,000.

Assume forty percent inheritance tax payable on the entire estate. Ugh! Current UK inheritance tax only rears its ugly head once the value of the estate exceeds £300,000, but with property prices going apparently ever upward, this rule will sneak up and pounce on more and more people.

Why should this hypothetical hircine only be allowed to give £180,000-worth of house to his wife and kids? What justification is there, apart from a possible need for the Gubmint to donate money to the Gay Whales Against Nuclear Power fund, to steal £120,000 from the kids? That 30% tax has effectively become 45%.

“Ah,” argue the supporters of high inheritance tax, “why should the wastrel offspring of the Rich [where ‘Rich’ is traditionally defined as ‘more money that I have or expect to have in the near future’] be given free money to continue their profligate lifestyles? They should earn everything they receive. I have never inherited anything, therefore no-one else should.”

Why? If the Goat chooses to give away his hard-earned, tax-paid cash, surely that’s his own business? Indeed, if the Goat chooses to give it to Oxfam by Deed of Covenant, the charity can claim the tax back. Does the Gubmint take 40% of the Book Token given to some nephew on his birthday? I rather think not. So I don’t see why the gift of a house that the Goat no longer needs should be any different.



Anonymous said...

No inheritance tax in NZ (actually, there is provision for it, but the rate is currently set at 0%).

Mme Cyn said...

That's it, anonymous! I'm cashing in my dark blue passport and going antipodean. Reckon I could learn the funny accent?

I agree with the Goat -- what makes the govenment think it's OK to tax the same money twice? Gee, if hypothetical Mom and Dad had, say, paid for hypothetical offspring's college education years before, they would have gotten a tax break on that money, right? So instead h.M&D decide to keep it for future use and then don't use it all up (and thereby have to depend on the state for their survival), and now when h.offsp. could get the benefit of it (which he would have had earlier if they had spent it on his college education), it's hoovered up by taxes. Are they telling us the h.M&Ds that they should give all/invest all their money in their kids and then trust those kids to take care of them in their old age? Hmmm... our society no longer works that way.

Anonymous said...

That's about how it is in the UK Mme Cyn, give it all away seven years before you die and then there's no inheritance tax - only trouble is the not knowing when one is going to die....!
Better be careful how much one gives away in any one tax year or that can be a problem I gather.
It's the paying more tax on already taxed money that doesn't seem right.
At least this is all supposing one has enough income etc to be required to pay tax in the first place - maybe not so bad a position to be in.


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