Tax 

Commission calls for scrapping of inheritance tax

Commission calls for scrapping of inheritance tax

Inheritance tax should be scrapped and replaced with a lifetime tax on gifts, according to a commission whose membership includes the Archbishop of Canterbury.

The Commission on Economic Justice found wealth was distributed much more unequally than income, with the wealthiest 10 per cent of households owning five times more than the entire bottom half of all households combined.

To address this it proposed that all income, whether from work or from wealth, should be taxed in the same way, with capital gains tax and the separate rates of tax on dividends abolished and income from dividends and capital gains incorporated into the income tax schedule.

It also recommended that inheritance tax be abolished and replaced with a lifetime gifts tax levied on the recipient, with a lifetime allowance of about £125,000.

The commission predicted this could raise an additional £9bn a year.

Its final report said: "Current taxes on wealth, and the income that derives from it, are lower than those on income from work. This is unfair, significantly benefiting the wealthy and encouraging tax avoidance.

"The tax system should do more to reduce wealth inequality, particularly by taxing the unearned ‘rents’ from wealth which do not contribute to economic output."

The commission also found land and property were under-taxed in the UK, and it called for a new land value tax.

The Commission on Economic Justice, put together by the left-wing think tank the Institute for Public Policy Research, was tasked with looking into how the British economy could be reformed to address the challenges highlighted by the UK's vote to leave the European Union in 2016.

Its membership included Dame Helena Morrissey, the head of personal investing at Legal & General Investment Management, the Archbishop of Canterbury, Frances O'Grady, the general secretary of the Trades Union Congress and Lord Kerslake, the former head of the Civil Service.

It found the UK economy was no longer delivering rising living standards for the majority of its population and needed "fundamental reform".

The commission warned that wealth inequality raised "important issues" of economic justice since having wealth gives people security and opportunities denied to those who don’t, but it said a great deal of wealth was unearned.

It called for the creation of a Citizens’ Wealth Fund, a sovereign wealth fund owned by and run in the interests of the whole UK population.

Capitalised over a 10-year period from a variety of sources, this would provide all citizens with a small annual dividend, or a £10,000 "universal minimum inheritance" to all people at the age of 25.

damian.fantato@ft.com

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