Tim Worstall

Your Tax Money At Work

How wonderful. The usual complaint is of private profit, public cost. Except, of course, when it comes to taxation, where it is public profit and private cost.
All and any tax rules have costs over and above the actual revenue squeezed out of the populace. The important thing is to maximise the revenue while minimising such additional burdens. The recent changes in trust law….and the ignorance of the Treasury on such things as Sharia inheritance law…mean that:

David Harvey, chief executive of the Society of Trust and Estate
Practitioners, said: "This is yet another example of the problems
caused by the Treasury’s proposals to tax trusts. Well over a million
wills will need review, including those of thousands of Muslim
families. The cost to the public will be at least £340m for a tax
designed to raise only £15m a year."

Oooooh! Well done lads!

In

7 responses

  1. dsquared Avatar
    dsquared

    “at least £340m”? My chin is itching uncontrollably. There are 1.6m Muslims in the UK, the majority of whom are not likely to have estates which would be above the IHT threshold. I very much doubt that intestacy is less common in the Muslim community. Now it might be that the average four-person Muslim household is going to spend £850 on trust advisory services, but it also might be the case that this guy pulled the figure out of his bum.

    Reply
  2. The Pedant-General Avatar
    The Pedant-General

    dsquared, old chum: you haven’t read the post at all have you?
    “and the ignorance of the Treasury on such things as Sharia inheritance law”
    “Well over a million wills will need review”
    These million wills are not confined exclusively to Muslims – it is just that Muslims are more likely – due to the impact of Sharia – to fall foul of the new regs.
    Or did your hardwired Islamophobia alert just pick up the “Muslim” and “Sharia” bits and ignore the rest?
    As for this:
    “I very much doubt that intestacy is less common in the Muslim community.”
    On the contrary, it sounds pretty much as though Sharia makes it very considerably less likely that Muslim individuals will be intestate, since otherwise they get caned by our chum Grabber Gordo.
    1 million wills, £340m, £340 per will. Possibly a little high, but not outrageous. I have yet to see the bill from my lawyer as, yes, my wife and I are having to re-write our wills…

    Reply
  3. dsquared Avatar
    dsquared

    So the cost is for all wills, not just the sharia ones? Fair enough.
    On the other hand, this is surely prima facie evidence that the tax will raise much more than £15m a year. If it is really going to cost £340m, then would it not be cheaper on average for these families to just pay the IHT?

    Reply
  4. The Remittance Man Avatar
    The Remittance Man

    PG
    I have no idea how you have set up your trust etc, but surely the cost of re-writing a will and reorganising any trusts is dependent upon the complexity of the estate and the wishes of the person involved.
    Re-writing a relatively simple will and trust set up may well cost less than 340 squids. On the other hand a complex trust arrangement, possibly involving sharia law (or even traditional African rules of inheritance), would in all likelyhood involve more lawyer time and thus more expense.
    On a more general note, I suspect that this particular set of tax rules has little to do with efficient revenue collection and far more with class warfare and a desire to prevent people passing on anything of value to their children. Munifisence is, after all, the sole preserve of the state (at least in the socialist universe).
    RM

    Reply
  5. Marcin Tustin Avatar
    Marcin Tustin

    I rather doubt that the ulterior motive is a hatred of inheritance – after all it is a tax the rich will still be able to well avoid – but instead it is about getting money out of trusts, and generally killing them off as a tax planning device. Instead of using trusts to avoid inheritance tax, people will have to use trust instead.

    Reply
  6. ajay Avatar
    ajay

    Amazing how critical thinking skills just disappear when the article backs up the critic’s own preconceptions.
    The article makes it clear that Haroon Rashid is ignorant: the Treasury said that there’s no need for a widow to sell her house, because she can live the rest of her life in it as a life tenant of a trust exempt from the rules.
    David Harvey, also, has a strong motive to exaggerate the problem, as he would profit immensely from the repeal of taxes on trusts, given his job as, ahem, chief executive of the Society of Trust and Estate Practitioners.
    And excuse me for not feeling too much anguish for the rich Muslims who have carefully drawn up their wills to make it quite clear how much in their opinion women deserved, i.e. half as much as men; who have furthermore tried their damnedest to avoid as much tax as possible in conforming to sharia; and now find themselves having to pay a (very small) share – one sixteenth! – to the Exchequer of what was effectively a windfall.
    Tim, if you want to do away with inheritance tax, say so.
    Tim adds: I have done, often. It should be repealed, no tax on inheritances, in the interests of greater social mobility.

    Reply
  7. john b Avatar
    john b

    “I have done, often. It should be repealed, no tax on inheritances, in the interests of greater social mobility.”
    Tim, would you like to join my new Screwing For Virginity campaign?
    Tim adds: Yes please!

    Reply

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