Dr. Martina Lawless:

On the level of emotion and the difficulty from a political perspective of CAT, one of the issues going well beyond the economics is that this is a tax that people pay very few times in their lives. It is a tax that they pay at a time they are dealing with a bereavement. Often it is the first time someone gets a tax bill as opposed to a tax that is paid as he or she goes as in PAYE. There is the salience of the tax and its link with loss. It is also linked often with family disagreements or debates about who makes the inheritance. This makes it a strangely emotional tax for people, which makes it difficult.

There also tends to be a mistaken perspective that it is a tax on savings that the person who has passed away has built up through his or her lifetime and this is somehow a double taxation whereas the more equitable way to look at it is that it is a tax on the recipient who has not built this up from his or her labour income, hard work or innovation. The recipient is getting a windfall gain from this capital acquisition and that is where, from an equity perspective, the tax is focused on.

There is also an argument that, even with a relatively high tax on these sort of wealth transfers, it will not get rid of intergenerational transfers of privilege in any way because families with better-off, higher socioeconomic backgrounds will be throughout the lifetime of their children providing them with benefits on an ongoing basis. This sort of windfall at the very end is part of what contributes to the unequal distribution of wealth but it will not entirely remove the benefits that come from being a member of a well-off household, which I say to strengthen the equity argument in favour of taxing the windfall. It will not go all of the way to removing intergenerational inequality but it would go some distance.