Latest / Best of Business / Geof Nightingale: independent tax expert weighs up benefits and drawbacks of an inheritance tax

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Geof Nightingale: independent tax expert weighs up benefits and drawbacks of an inheritance tax · Best of Business

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  Speaker 2: Now, how do you feel about an inheritance inheritance tax?
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  Speaker 2: It is understood that Labor is considering whether they advocate
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  Speaker 2: for an inheritance tax or not, and they're reportedly taking
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  Speaker 2: inspiration from Ireland's version. Now, what happens in Ireland is
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  Speaker 2: they don't pay any tax on anything that they get
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  Speaker 2: inheritance wise of up to five hundred and fifty eight
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  Speaker 2: thousand New Zealand dollars. But then if it clicks over
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  Speaker 2: that it's thirty three percent tax on everything else. Jeff
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  Speaker 2: Nightingale is an independent tax advisor who joins me.
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  Speaker 3: Now, Hey, Jeff, good afternoon, Heather.
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  Speaker 2: You like the Irish version of it?
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  Speaker 3: Well, I'm not sure I like any versions of inheritance tax,
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  Speaker 3: but they're pretty common amongst the OECD, and most of them,
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  Speaker 3: like the Irish version, do have an exemption both for
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  Speaker 3: a financial level but also usually exempting your personal house.
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  Speaker 2: Oh so your personal house you can inherit from your
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  Speaker 2: parents and then also another five hundred and fifty eight
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  Speaker 2: thousand New zeal do Yeah.
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  Speaker 3: Different jurisdictions have different rules, but in principle most of
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  Speaker 3: them have that.
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  Speaker 2: Yet, why don't you like an inheritance tax?
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  Speaker 3: Well, I think there are some really good arguments for
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  Speaker 3: it from a wealth redistribution and an equity sense. It
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  Speaker 3: sort of provides a capsule at the end of life
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  Speaker 3: to pick up untaxed capital gains and things, and it's
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  Speaker 3: a decent source of revenue for the government. There are
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  Speaker 3: a number of reasons why you might not like it.
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  Speaker 3: It can get very complex to administer because it's based
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  Speaker 3: on valuations. It can drive some really unwelcome economic behaviors
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  Speaker 3: because you've got to find cash to pay it, and
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  Speaker 3: therefore you might realize you might sell a family business,
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  Speaker 3: or you might realize some assets that are not yet
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  Speaker 3: you know, that's not the right time to do that.
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  Speaker 3: And then the final thing is people tend to hate it.
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  Speaker 3: Voters don't like it.
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  Speaker 2: No, I would have thought so. I mean, yeah, it
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  Speaker 2: seems like it's death to the party who comes out
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  Speaker 2: with the death tax. Right. Is there an argument for
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  Speaker 2: us doing it because we are outliers?
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  Speaker 3: Yeah, I mean, there are some reasonable arguments for doing it.
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  Speaker 3: The OECD often recommends that we consider it we're outlies
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  Speaker 3: in a couple of senses. One is we don't have
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  Speaker 3: a capital a broad based capital gains tax, and therefore
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  Speaker 3: an inheritance tax would act as a sort of a sweeper,
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  Speaker 3: a cover end of life to pick up some of that.
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  Speaker 3: And then the other reason is the economic reason, which
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  Speaker 3: is to try and encourage the handing down and the
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  Speaker 3: using of assets during someone's lifetime rather than accumulating big
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  Speaker 3: wealth inequalities. That's why, you know, That's why the OECD
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  Speaker 3: recommends it, but voters don't like them. No.
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  Speaker 2: Absolutely. Do you think, just on the capital gains tax
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  Speaker 2: which you mentioned just before, do you think that the
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  Speaker 2: attitude has changed in this country on the CGT or
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  Speaker 2: is it still a nago.
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  Speaker 3: I think it's shifted a bit, but I'm biased. I
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  Speaker 3: was a member of the Tax Working Group in twenty
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  Speaker 3: eighteen that recommended one, but I think it has shifted it.
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  Speaker 3: I think people are starting to look forward. We're going
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  Speaker 3: to have a bit of a bit of a tax
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  Speaker 3: revenue shortage in this country over the next twenty or
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  Speaker 3: thirty years. Treasury is projecting unless we deeply slash government expenditure,
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  Speaker 3: and I don't think you know, the voters have not
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  Speaker 3: indicated they want to deeply slash They want to control it,
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  Speaker 3: but they don't want to deeply slash it. And so
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  Speaker 3: we may need some more revenue, and probably the most
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  Speaker 3: sensible thing to go to would be a realization based
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  Speaker 3: capital gains tax.
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  Speaker 2: GEF, there is a text that's come through. Can I
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  Speaker 2: please ask Jeff? This is here that can you please
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  Speaker 2: ask chef. Would asset's owned by a family trust likely
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  Speaker 2: attract the inheritance test because that tax because there would
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  Speaker 2: be a big growth coming for trusts.
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  Speaker 3: If so, yes, I mean, it's all in the question
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  Speaker 3: of design. But almost certainly, if you wanted the inheritance
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  Speaker 3: tax to stick, you would have to apply it to
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  Speaker 3: family trusts, and somehow transferred the exemptions over. New Zealand
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  Speaker 3: did just to have an inheritance tax. We got rid
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  Speaker 3: of it in nineteen ninety two, but it was very unpopular.
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  Speaker 3: But in those days there was a lot of effort.
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  Speaker 3: You know, tax advisors like me made good business out
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  Speaker 3: of putting people into trusts and trying to avoid the thing.
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  Speaker 3: And that's the other kind of argument against them.
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  Speaker 2: Yeah, so from a personal point of view, actually, Jeff,
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  Speaker 2: it might suit you if we bring these complicated things,
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  Speaker 2: and thank you very much for your time. I appreciate it.
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  Speaker 2: Jeff Jeff Nightingale, Independent Tax Advice.
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