two things certain in life are death and taxes
Kitty Miv, Editor
02 April, 2015
As the saying goes, the two things certain in life are death and taxes. In many countries, that includes being taxed after death, which is a tad unsporting, one might think. You pay your taxes on income, capital, and consumption during your life, make the most of whats left, then when you kick the bucket the government wants another slice of the estate pie. Effectively, a legal form of double taxation. The US Republican-majority Senate last week voted in favor of doing what some countries have already done, to abolish the estate tax. All but one Republican voted in favor; all but one Democrat voted against. For arguments included that farmers and small family businesses can be hit especially hard, forcing them to sell assets such as land or the business to pay the tax. Arguments against included that the measure would benefit only the very wealthy. All rather academic really, as the chance of this getting past President Obama is about as likely as a globe-aligning, corporate tax rate-reducing, full US tax reform. In other words, it was a nice idea while it lasted.
Across the pond, a minor economy that has been impacting the global economy in a very disproportionate manner is facing its own challenges over estate taxes. Greece has been referred to the European Court of Justice for imposing a preferential 0.5 percent inheritance tax rate for legacies to certain Greek non-profit organizations, while legacies to similar entities in other EU/EEA member states are subject to rates of 2040 percent if a reciprocity arrangement is not in place. Which, it is claimed, makes the latter in breach of the principle of free movement of capital under EU law. This might appear somewhat inconsequential considering the challenges faced by Greece and, by extension, the EU presently. Yet despite the requirement for major tax reform in the former, and the potential for a Grexit destabilizing the entire eurozone in the latter, principles regarding a minor element of Greek inheritance tax law must be upheld to maintain standards, I suppose.
No doubt the UK Chancellor, George Osborne, would have loved to introduce generous changes to the inheritance tax in his recent Budget had he not been hamstrung by his coalition partners. However, a more pressing issue right now for the Tories and indeed the opposition Labour Party is achieving a majority government in the May 7 general election. Normally, a government that had pulled a country out of a deep recession, despite ongoing economic troubles in the eurozone and elsewhere in the world, reduced taxes for the lowest paid, and still managed to pay down the deficit, would stand a good chance of an outright win. And usually, the fight would be between the Conservative and Labour Parties, with the Liberal Democrats holding the balance. But this time smaller parties, such as the UK Independence Party (UKIP), the Scottish National Party (SNP), and the Greens, have thrown such certainties into doubt. Where tax is concerned, Labour, the Liberal Democrats, the SNP, and the Greens generally want to hike taxes, with the prime targets being the rich (who knows at what point one goes from being reasonably well-off to rich?) and big business. The Conservatives and UKIP would prefer taxes to go down, and instead propose to focus on cutting welfare and expenditure on services to pay down the deficit and balance the books. If UKIP is to be believed, further potential savings can be found from the UK leaving the EU, with even the Conservatives more middle of the road in their euroskepticism agreeing to a hold a public referendum after the election. All of which leaves business caught between a rock and a hard place, with the economic uncertainty hanging over EU membership and the potential for taxes to rise should the current opposition (perhaps in coalition with like-minded minority parties) get into power. All of this, of course, falls on the shoulders of the voting public, who, despite the election campaign officially starting on March 30, are likely already election-weary after four months of unofficial campaigning (or rather, cross-party sniping) since the Autumn Statement. Still, just another five weeks to go...
« Go Back to Blogs