Academic journal article Australian Journal of Social Issues

Inheritance Taxes in Australia: A Matter of Indifference, Not Taboo

Academic journal article Australian Journal of Social Issues

Inheritance Taxes in Australia: A Matter of Indifference, Not Taboo

Article excerpt

Introduction

In 2010 the final report of the Henry Tax Review cautiously reintroduced the issue of inheritance taxes to public debate in Australia. It did so through two short paragraphs on 'wealth transfer taxes', in sharp contrast to its detailed consideration of other taxes. The first paragraph observed that a 'bequest tax' would be 'an economically efficient way of raising revenue and would allow reductions in other, less efficient taxes' (Henry et al. 2009: 37). The second stated:

Given the controversial history of bequest taxation in Australia, the Review has not recommended the introduction of a bequest tax, but believes that there should be full community discussion and consultation on the options. Most OECD countries impose bequest taxes--either through taxes on the whole estate or individual inheritances (Henry et al. 2009: 37).

The Rudd Labor Government immediately ruled out the prospect of an inheritance tax (Le Grand 2010). Even the Greens--a minority party whose policy platform includes an inheritance tax--declared that it was not a priority (Tillett 2010). The 'community discussion' no sooner began than it was over. In this context, Frank Stilwell, Professor of Political Economy at the University of Sydney, observed that 'any tax on inheritance is now taboo for Australian governments' (Stilwell 2010). The newspaper columnist Adele Horin repeated the observation. The unseemly brawl in the mega-rich Rinehart family, she reflected, 'serves as a reminder that Australia is a rarity among developed nations--it lacks an inheritance tax, an estate tax, a bequest tax, call it what you will'. Even the 'tax-phobic Tea Party Republicans' in the United States had not achieved this objective. The topic in Australia was 'taboo', and 'regarded as political suicide' (Horin 2012).

Federal and state Governments abolished inheritance taxes in Australia during the late 1970s and early 1980s. In doing so, Australia joined Canada as the only advanced capitalist country without an inheritance tax. Unlike Canada, estates were not understood as a capital gain liable to income tax, making Australia unique among advanced capitalist countries (Sandford 2000: 104). In 1981 William J. Pedrick, an American legal scholar, described his 'shock and disbelief that a modern western country like Australia should abandon taxation of intergenerational wealth transfers as a modest but appropriate source of revenue'. He concluded that abolition had occurred in a 'mood of "anti-tax" jubilation', whereby Australia had 'rushed pell mell into complete abolition of estate and gift duties as its fiscal invention for the 1980's' (Pedrick 1981: 130). In other words, it was an anomaly which would soon be reinstated. More than thirty years later there is no sign of reinstatement. Moreover, Australia is no longer an anomaly. Israel abolished the taxes in 1981, New Zealand in 1992, Sweden in 2005, and Austria and Singapore in 2008. The United States scaled its taxes back in 1976, 2001 and 2003.

This article reevaluates the trajectory of inheritance taxes in Australia, in the spirit of the Henry Review's call for 'full community discussion' (Henry et al. 2009: 37). In doing so, it builds on Jens Beckert's (2008a) pioneering comparative study of inheritance taxes. Beckert uses parliamentary debates and treatises on inheritance to examine the 'discursive field' around inheritance in the United States, Germany and France from the late eighteenth century to the present. On this basis, he frames the discursive field in the United States as 'individualistic-meritocratic', in Germany as 'family-social justice', and in France as 'egalitarian-family based'. This article applies the same approach to Australia, facilitating a reappraisal of Australian inheritance taxes in comparative perspective. Specifically, it argues that the discursive field in Australia is best understood as 'liberal-pragmatic', and the failure to reinstate inheritance taxes is better understood as the product of indifference rather than taboo. …

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