As the fallout from the Panama papers leak continues to gather pace there is a growing optimism that governments around the world could move to simplify tax regulations. The UK is already heavily involved in the Panama leak with an array of London properties now coming under the spotlight. Indeed David Cameron has received additional criticism after admitting a £30,000 investment in an offshore fund having now confirmed he received a £200,000 gift from his mother. While the politicians continue to call for David Cameron’s head this focused pursuit could backfire and lead to a simplified tax system.
While there are ways and means of reducing future inheritance tax obligations for many people their largest inheritance is likely to centre round property. As we have seen in years gone by, the hefty inheritance tax bill many people face as a consequence of inheriting property can see beneficiaries forced to dispose of their assets. However, if we take a step back and look at inheritance tax in isolation, is it a fair tax?
Does fairness come into it?
If you look at many taxes connected with the investment world we often take them for granted but if you take a step back and consider them in more detail, are they fair? Inheritance tax is something which many of us accept but is it really fair to tax assets again when passed over to beneficiaries bearing in mind they have been taxed for their “life”. There have been calls to simplify the UK tax system for many years and with their home not only the main investment for many people, but also buy to let investors, perhaps this could actually benefit the sector going forward.
At this moment in time governments around the world are looking to shore up their beleaguered budgets which have come under massive pressure since the 2008 economic downturn. Will they perhaps look on inheritance tax in a fairer light once economies around the world have steadied?
Tax avoidance is not illegal
The tax system in the UK is one of the most complicated in the world which is one of the reasons why there are so many loopholes. If we cast our minds back to David Cameron’s recent revelation that he received a £200,000 from his mother, this is not illegal. Tax avoidance is simply a means of arranging your investments and your assets in such a way as to keep your tax liabilities as low as possible. Tax avoidance is not illegal. Tax evasion is.
Whatever happens in the short to medium term with regards to the UK tax system we will likely see an array of further revelations in the days and weeks ahead from the 11 million Panama papers which were leaked. We are already starting to see confirmation of the underlying owners of luxury properties across London and more will follow. Whether these revelations will eventually lead to a simpler UK tax system remains to be seen but is certainly putting unfair taxes such as inheritance tax under the spotlight.