From: Ronald Raygun 
Subject: Re: Inheritance Tax
Newsgroups: uk.finance
Date: Thu, 07 Oct 2004 11:24:54 GMT

Fred wrote:

> However this discussion is (intended to be) about the issue of fairness in
> taxation and in that context I think it's perfectly reasonable to look at
> the movement of monies from the pov of the benefits they confer. So
> receiving £250k (say) from a gift, an inheritance or from an employee is
> equivalent.

The reason it is not equivalent is that if you invest capital and
earn interest or dividends, or if you work for your money, the benefit
is not yours alone, but is mutual.  Your employer benefits from the
work you do, the company or bank you invest in uses your capital to
their own advantage.  There is positive benefit on both sides, and
in fairness the scenario should be taxed wihtout it mattering much
how the tax is split between the two sides.  The salient point is
that the net benefit is positive.

With a gift, on the other hand, although the donee benefits by
receiving the money (or other form of asset), you seem to forget
that the donor has an equal but negative benefit, as a result of
"losing" the money (dealing as we are in "hard" value, we can't
really count as a "benefit" the warm feeling the donor gets from
helping the donee).  Applying the same principles as above, it
should not matter how the taxation is split between the two, but
it should be based on the *net* benefit.  But this net benefit
taking donor and donee together is NIL, and so it is unfair to
tax this scenario at all.