Death duties
Sir: Your editorial 'Death and taxes' (3 February) says that the abolition of inheri- tance tax would require other changes to the tax system and goes on to recommend the extension of capital gains tax to deemed disposals on death.
This was the position under the original capital gains tax legislation of 1965. Deemed disposals on death were exempted by the Heath Government in 1971, and no attempt was made to reimpose this tax by the Labour Government of 1974-79, Of the countries of the Organisation for Economic Co-operation and Development (the industrialised West) only Canada and Spain levy capital gains tax on the occasion of death and then only on certain categor- ies of transaction. Few, if any, developing countries do so. Most countries in the world ley no tax on death — neither inheritance tax nor capital gains tax, Within the industrialised West, the Brit- ish capital tax is already unusually onerous. Australia and Spain are the only OECD countries that levy capital gains tax at a higher rate than British on long-term gains from shares held by individuals. Ten coun- tries exempt such gains entirely; seven tax them at less than the full rates of income tax; and one affords relief through averag- ing (top-slicing).
You are rfght to say that the net cost to the Government of abolishing inheritance tax and reintroducing capital gains tax on death would not be significant. This is another way of saying that there would be no significant benefit for the taxpayer. Indeed, the taxpayer might well lose. Capital gains tax on death is just as much of a death tax as is inheritance tax. Those who wish to abolish death taxes are delud- ing themselves if they imagine that the abolition of inheritance tax combined with the reintroduction of capital gains tax on death would afford any improvement. Bri- tain would be no nearer to realising your aim of encouraging 'the accumulation of wealth from generation to generation' and might even be further away.
Barry Bracewell-Milnes
26 Lancaster Court, Banstead, Surrey.
Previous page
