Monday, August 20, 2007

Ashley on IHT

Jackie Ashley manages to miss the point entirely on IHT. There are two issues of note here. The first is that under the current system, it is entirely possible, if you are prepared to put in the effort to sort out the planning, to avoid paying any IHT at all. For the very rich, Inheritance Tax is effectively optional. However, the massive and continued rise in house prices, coupled with the deliberate policy of fiscal drag employed by Brown as Chancellor has meant that people who are not 'rich' but who do possess a house in the southern half of England will now be liable to IHT. Not being rich, they are unlikely to be able to afford in depth financial planning and tax advice. Consequently, regardless of how often one says that IHT is a tax 'on the rich' it is the middle classes that will increasingly be liable. When Ashley says
When the super-rich avoid so many taxes, one stops them transferring their advantage to the next generation
in other words, she is getting it precisely arse-about-face.
On the wider issue of the Conservative attitudes towards tax-cuts versus 'financial stability', this is something of a non-issue. On the Today programme this morning Cameron was repeatedly pressed by Jim Naughtie to say whether he agreed with John Redwood that lower taxation leads to greater prosperity and that, if so, why didn't he announce a wide-ranging programme of immediate tax cuts. Yet the two are not synonymous. While it is generally true that cutting the rates of certain taxes, notably corporation taxes, can lead to higher revenues, it is also true that short term revenues will be lower. It would be irresponsible to push for a specific tax cut now, for implementation after an election that could be any time from October to 2010.
The Conservatives have said again and again that they believe in the merits of a lower tax regime. Redwood's report was a good start in that it displayed the thought processes behind that statement. The Tories should be very careful in setting specific tax pledges in stone an unspecified amount of time before an election.

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