Sisters fail in bid for inheritance tax exemption

I was disappointed, though not surprised, to read that the European Court of Human rights had turned down the bid by two sisters living together, for equal inheritance tax treatment as a same-sex couple living together.

Since their property was said to be worth about £800,000 the one sister who outlives the other is not going to be in penury. But that is beside the point. There are aspects of Inheritance Tax which are unjust. Apart from the fact that the seriously wealthy can avoid paying, through the use of various financial and legal devices, the tax fails to distinguish between that part of an estate which has been built up through hard work and that which is merely a growth in land value.

A work of art, for instance, may not even have been valuable when first acquired. It may have been created by the deceased. If, subsequently, it becomes valuable, its possession does not enable the owner to earn any revenue from it, unless, perhaps, by charging people to look at it. And so a tax on ownership of objects of art can only be paid if those who inherit sell them off to raise the money. A business, too, is something whose value has been created by the work of the deceased, and whilst in this case there is a revenue stream, the tax is levied on its capital value. Here is the injustice of Inheritance Tax.

On the other hand, much of the value of an estate tends to consist of land value, and Inheritance Tax functions as a crude form of land value tax, based on capital values (selling prices). There is a certain justice here, since land value is created by the presence and activities of the community. But it is the wrong sort of land value tax. If the right sort of land value tax was in place - one based on annual rental values, and at a high rate - then there would be no need for Inheritance Tax at all, and inter-generational justice would be achieved much more efficiently.

When the idea of Civil Partnerships - so-called Gay Marriage - was first introduced, the conservative elements of the church got all upset about it. Nobody seems to have pointed out that its principal purpose was to get round the effects of legislation affecting property rights. It is a pity that they did not channel their energies instead towards attacking the unjust legislation built in to the whole concept of Inheritance Tax, the unfairness and inconsistency of which has now been brought to light by the present case.