Inheritance Tax: ‘A gesture towards the notion of equality’ or an affront to economic freedom?
21st February
- Stephen Davies (Institute of Economic Affairs)
- Rory Meakin (the Taxpayers’ Alliance)
- Rita de la Feria (Professor at Durham Law School)
In what is sure to be one of its most controversial debates of the year, this week the Union Society’s guest speakers will address the issue of inheritance tax. Officially introduced in 1986, the tax has continued evolving throughout its long history until it now equates to around 0.7% of the Government’s income, or £3.1 billion in 2012–13, despite the fact that in 2007 it was only paid from 3% of inherited estates. With the National Equality Panel reporting findings that the gap in household wealth between the richest 10% and the poorest 10% of the population dwarfs the gap in weekly full-time earnings by a factor of 27, it could be argued that this tax serves as an equaliser to minimise an imbalance of opportunities between generations and the continuance of an ‘idle rich’ class who never need work to earn their living. Furthermore, as government austerity plans look set to continue into the foreseeable future, this quantity of money appears to be one that the Treasury cannot afford to lose.
Yet this did not stop George Osborne promising to raise the inheritance tax threshold from £300,000 to £1 million at a Conservative party conference in 2007, claiming that this would make the figure of those affected fall from 37% of householders to just 2%, in response to the tax’s deep unpopularity. Seen by many as a second tax on earnings which have already been subject to income tax, capitalists argue that the state has no business to attempt to redistribute wealth which has been worked for and that parents have the right to pass onto their children. Even the more liberal often view it as a halfhearted effort to reduce inequality, with the very rich evading their contributions through methods such as setting up trust funds, equity release schemes, and manipulating who receives their estate to use nil-band thresholds to their advantage. What we are sure to see on Friday is a house divided between a gesture towards the notion of equality and the right to economic freedom.
The first speaker to take to the floor for the proposition will be Stephen Davies, the Education Director at the Institute of Economic Affairs. This economic think tank analyses all areas of economic policy and represents a number of different viewpoints, although all of its members support free markets and “believe that society’s problems and challenges are best dealt with by individuals, companies and voluntary associations interacting with each other freely without interference from politicians and the state. This means that government action, whether through taxes, regulation or the legal system, should be kept to a minimum.” A paper written for the group in 2002 claims that the “abolition […of inheritance tax…] would have little effect on government tax revenues” as it actually does ‘immense economic damage’ through high collection costs and the fact that many people whose homes have recently risen in value are unaware that they will be affected by it. With Dr Davies himself coming from a background of lecturing in economic history and social policy, he is certain to be able to contribute a unique perspective to the debate which encompasses the evolution of the tax and its effects on the population.
The second proposition speech of the evening will be given by Rory Meakin, the Research Director at the Taxpayer’s Alliance. Formed in 2004, the pressure group and think tank was described as “arguably the most influential pressure group in the country” by The Guardian in 2009 and had surpassed 50 000 members by 2010. It claims that “high taxes damage the British economy and our way of life. Burdensome taxation stunts economic growth and tens of thousands of jobs are being lost as huge tax bills reduce incentives to work, invest and save. In the long-run, higher taxes make us all poorer.” It undertakes research into a number of different aspects of the Treasury’s work and government spending and claims to have secured tax cuts worth £37 billion during its 10 years of operation. Mr Meakin has worked with the alliance since 2010, including spending time as Head of Tax Policy and playing an important part in policy development, meaning that his depth of insight into the issue of inheritance tax is sure to offer a new side to the debate.
The final speaker of the evening, and the only voice for the opposition, will come in the form of Rita de la Feria, Professor of Tax Law at Durham University. She has worked with a number of international groups on policy documentation, including the European Parliament and the IMF, and her research is often cited by both national and European courts. From 2011 to 2012 Professor Rita de la Feria was appointed as an Adviser to the Portuguese Government on their VAT policy after the 2011 bail-out agreement, and she was later called to give evidence before the UK House of Lords Economic Affairs Committee’s enquiry into taxing corporations. We can be assured that Professor Rita de la Feria’s portion of the debate will open the argument out into its wider international context, drawing on the actions and examples of best practise of foreign administrations in order to inform the actions of our own government.
With the debate on Friday night set to provoke controversy in all quarters, it is impossible to predict in advance in which direction the house will choose to vote. But what can be guaranteed is an evening of animated discussion to encourage reflection on an issue which divides the population.
More Information:
- Institute of Economic Affairs – http://www.iea.org.uk/
- Taxpayers’ Alliance – http://www.taxpayersalliance.com/
- Professor Rita de la Feria – https://www.dur.ac.uk/law/staff/?id=10664