The Mug Effect

A story.

I have a friend. No, a real friend. I’ve known him forever and he’s the most risk averse person I’ve ever met. He was risk averse at University. And his job now? Think of the job that would be suited to the most constitutionally risk averse person in the world. No, more risk averse than that. That’s what he does.

He lives in an estate. No, the kind where houses are especially expensive. And several years ago he called me up because he was buying what us Labour Party voters these days call a mansion. And he wanted to know whether he should accept his solicitors’ suggestion to use a stamp duty avoidance scheme.

No need to discuss the technical details of how these schemes operate. But promoter develops ‘idea’; punts idea to public through a range of intermediaries. Charges punters 30% of stamp duty land tax saving – to be paid upfront, naturally – with a money back guarantee if the scheme doesn’t work. Punter pays the 30%. HMRC challenges the scheme. Scheme fails. Punter pays the 100% stamp duty he should have paid in the first place. Asks promoter for his 30% money back. Promoter (who has spent all the money in the meantime) winds company up. And punter asks himself (because the data shows that tax avoidance is typically carried out by men, even allowing for the effects of gendered wealth distribution) ‘why did I ever do that?’

That’s a question to keep punters awake at night. Because even though they might forgive themselves for not understanding the technical bits of the planning, they tend to find it more difficult to work out how they came to ignore something full square within their expertise: the credit risk they were taking on an unknown counterparty (the promoter).

Interesting side note: I think I am right in saying that no residential stamp duty land tax scheme has ever been held to work.

Of course, I told my friend “no”. I would never do one – those with specialist tax knowledge tend to have rather simple tax affairs – and with his risk profile he certainly shouldn’t. And so he didn’t.

What’s interesting about that story is not that he contemplated it – a fact interesting only to me, who knows him – but why he contemplated it.

In his estate, everyone was doing it. The neighbours to the right of him bought their house with a scheme, as did those to the left, as did everyone in the town. It was being sold by estate agents as part of the service. So that even those heavily inclined against such behaviour (such as my friend) were eventually left wondering, well, ‘perhaps these things really are ok?’ or ‘who’s the mug here?’

Those really in the know will probably know the town I’m talking about. But you don’t need to know the town. If you read the lists of members of partners of tax avoidance schemes – very often done through a vehicle called a Limited Liability Partnership – and the lists can be downloaded from Companies House, you’ll see the same effect. Let’s call it the Mug effect. You’ll see mouthfuls of dentists, or the whole squad of a particular football team, or staff of a particular bank.

I thought of this yesterday when I read that Swiss Bank accounts had become popular in the 1980s such that ‘probably anyone who was a member of a golf club then had a bank account in Switzerland’. In a different sphere (evasion) to the stamp duty sphere (avoidance) discussed above, the Mug effect remains a powerful force.

Now I’ve written elsewhere about the balance that HMRC seek to strike in tackling tax evasion.

On the one hand, there’s the pragmatic desire to maximise the cash you get in. You want people to come forward and ‘fess up. And if you send the signal you’ll bash them if they do, they won’t. I’ve also written about how the evidence is that this policy has failed to deliver.

On the other hand, you know that those who are wealthy and powerful are subject to the same rule of law as the rest of us. Or should be – that’s what Magna Carta says. And you know that society demands they be held accountable for any criminality. There’s also the more prosaic concern that, if you allow people to believe there will be another amnesty from criminal sanction for tax evaders around the corner, they won’t see the point of coming forward for this one: you’ll make it more difficult to achieve your pragmatic desire to maximise the cash.

But there’s also this isn’t there? You need constantly to be reminding people that evasion isn’t ok. Lest the Mug effect take hold. And the best way to accomplish that is a constant stream of criminal prosecutions for evasion. And we haven’t been having them – not amongst wealthy evaders anyway.

Now, to bring those prosecutions, you need to know where in the tax system the Mug effect is taking hold. And according to an excellent report by the National Audit Office, HMRC doesn’t. And nor does anyone else. But that’s a blog for another day.

How much worse can public confidence in HMRC get?

Following years of front page stories of personal and corporate tax avoidance, damaging allegations of sweetheart deals with major global banks and telecommunications firms, multi-billion pound shortfalls on projected receipts from tax amnesties cut with Switzerland, and the absence of criminal prosecutions for tax evasion, you’ve gotta wonder quite how much worse public confidence in HMRC can get.

The explanation for the latest in these public relations disasters – the absence of criminal prosecutions – is apparently that HMRC cut a deal with the French authorities for use of the HSBC data that limited the extent to which it could be used to support criminal prosecutions. But what puzzles me is (1) why the French would be interested in imposing such a restraint on our use of that data. Their banks weren’t implicated after all; and (2) if that is the cause of the lack of criminal prosecutions how we’ve nevertheless managed one?

Raising further questions about that explanation is the fact that Article 27 of the UK-France Double Tax Convention requires each party to exchange information “to prevent fraud”.

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So that’s one set of questions we need answers to from HMRC

Another is this statement released at the time we cut the amnesty with Switzerland in March 2012.

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Why not? Why should we tie our hands as to how we gather evidence of people evading UK taxes?

No substantive answers, yet, to these sets of questions.

In terms of process, HMRC’s response to these issues of profound public concern has been to pull the man responsible for “shaping tax policy and strategy” from this afternoon’s Public Accounts Committee session, to ignore the question ‘why’? and to fail to offer up to the Committee the woman responsible for ensuring that “HMRC successfully collects the full and correct amount of money due from UK taxpayers [and] investigates offences against the UK tax system”.

How much worse? Quite a lot worse.

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Postscript HMRC’s Press Office have just sent me the following statement denying that Edward Troup was ever slated to give evidence. That may or may not be right (Post-postscript: see below – it appears not to be) but it’s hardly the point. He should have been slated and he should be giving evidence.

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HMRC’s Press Office now say that Jennie Granger was always slated to appear. My mistake (no mention of this was made in the Telegraph report). But if one looks at the Public Accounts Committee listing for this afternoon’s hearing

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you will see that, consistently with what the Press Office say, Jennie Granger will appear but inconsistently with what they say Edward Troup was slated to appear.

The twitter exchange between me and HMRC’s Press Office can be seen here:

Tackling Avoidance and Evasion: a Primer

Two sleights of hand.

#1 – the Google Defence: “You should pay the taxes that are legally required.” Unpacked, this means merely: “because it’s lawful, we can do it.” Tax avoidance – even in its most egregious forms – is lawful. If it isn’t lawful, it doesn’t work. And the answer is a defence to a different criticism: if I am non-domiciled, even if I have lived in the UK for all my life, I only have to pay tax on that income I choose to spend in the UK. The question isn’t whether that state of affairs is legal. It is. The question is whether it’s right.

And #2 – the Lawmaker Fallacy: if Parliament doesn’t like our avoidance actions it should “change the law.” But this is to ignore the limited scope that our domestic Parliament, bound by a web of international tax treaties and EU law, has unilaterally to improve the law. Particularly in the field of business tax. If Amazon sites its servers outside the UK, the present OECD rules enable it to avoid UK corporation tax. But effecting broad based change to these laws involves the OECD shepherding the G20 countries to agreement in the face of powerful domestic vested interests.Think Global Climate Change Summits with whistles.

These are the fallacies you’ll be fed by those seeking to deflect criticism. You’ll see them deployed over the next few days by players in the #SwissLeaks #SwissStorm. And they are the truth, but they are not the whole truth.

We know this: tax specialists like me, Inspectors working for HMRC, Parliamentarians, Charities pushing the Tax Dodging Bill and the promoters of the FairTaxMark. We see that the law on tax avoidance has fallen behind what the public demands. And we fear the corrosive effects of a loss of public confidence on the functioning of our tax system.

We work with the world we have. The work of the Public Accounts Committee under Margaret Hodge – appreciated as an exercise in consciousness raising rather than forensic scrutiny – has raised to Gas Mark 9 the temperature on tax avoidance. Consumer pressure has pulled tax to the top of what we politely style ‘Corporate Social Responsibility Agenda’. And the Government has played its part, using the Code of Practice on Taxation for Banks and new rules on Public Procurement, to try and ensure there’s a pre-tax cost attached to behaviours that focus only on improving post-tax returns.

I wouldn’t want to understate the power of self-interest to bring about changes in behaviour: it may well be the defining logical proposition of human history. But, in a field so laden with opportunities to obfuscate and dissemble, in a field where minimal compliance carries such obvious rewards, it has its limitations.

So what, ultimately, we’re left with is a naked ethical proposition: pay less than your share and you bear responsibility for society being not as it should. This proposition has been advanced by, for example Christian Aid, in its ‘Tax for the common good’ report. But there’s much work to be done in fleshing it out. In a world where the tax laws distantly trail ethical injunctions, what does a fair share really look like?

Age Biases in Tax and Welfare Decisions

This is an extract from the most recent Populus Voting Intentions Poll:

CaptureOn Friday, Faisal Islam noted the huge difference between the voting preferences of the young: 18-25; 25-34 and 35-44 (all of whom show a strong preference for Labour) and the old: 65+ being the only group showing a strong preference for Conservatives.

The Conservatives responded, today, by announcing that they would extend the Pensioner Bonds scheme of which, as I put it:

So which came first? The chicken or the egg?

In an idle moment – ha! – I trawled back through the Budgets and Autumn Statements of this Parliament to look for measures targeted specifically at the young and old. How have those groups borne the burden of those public spending decisions?

Such an exercise quickly runs aground because many of such measures are not specifically costed. Either you include measures only if specifically costed – which leads to one kind of distortion – or you confine yourself to looking at changes to tax and benefits (which are always costed) but ignoring age-specific non-tax or benefit changes (pensioner bonds, student tuition fees, Public sector pensions, etc). I chose the latter.

Sometimes, the costs change between when the measures are announced and when they are implemented. Again, for the sake of consistency, I have given the costings for the first period for which full costings are given. If no full costings have been given, I have given the latest provided. I can’t promise to have done this exercise perfectly – tracing through the full costings of measures announced with prospective effect is complex – but what I have done follows.

2010 Budget:

  • introduced the following measures benefiting +65s: introduced the pensions triple lock (£5,730m), pension credit minimum income guarantee (£3,170m)
  • introduced the following measures hitting -21s: restriction to Sure Start Maternity Grant (£375m), abolition of health in pregnancy grant (£640m), abolition of Child Trust Fund (£2,530m), abolition of Savings Gateway (£410m), conditionality for lone parent benefits (£1,390m), second income threshold for family tax credits (£660m), child tax credit remove baby element (£1,395m), child tax credit reverse supplement (£900m), freeze child benefit (£5,185m)
  • introduced the following measures benefiting -21s: increase child tax credit plus above indexation (£8,910m)

Net Effect: Over 65s gain £8,900m; under 21s lose £4,575m

2010 Comprehensive Spending Review:

  • introduced the following measures benefiting +65s: Cold weather payments (£200m)
  • introduced the following measures hitting -21s: withdrawal of child benefits to higher rate taxpayers (£10,110m), changes to working tax credit for families (£4,290m), child tax credits – use RTI (£1,010m)
  • introduced the following measures benefiting -21s: increase in child tax credit (£1,805m)

Net Effect: Over 65s gain £200m; under 21s lose £13,605m

2011 Budget:

  • introduced the following measures hitting -21s: abolition of Employment and Support Allowance NICs concession £35m

Net Effect: under 21s lose £35m

2011 Autumn Statement:

  • introduced the following measures hitting -21s: reversal of changes to child tax credit (£4,940m), freeze working tax credit (£1,385m)

Net Effect: under 21s lose £6,325m

2012 Budget:

  • introduced the following measures hitting +65s: freezing of age-related allowances (£3,290m)
  • introduced the following measures hitting -21s: threshold and tapering of child benefit (£1,505m)

Net Effect: under 21s lose £1,505m, over 65s lose £3,290m

2012 Autumn Statement:

  • introduced the following measures benefiting +21s: increase child benefit (£175m)

Net Effect: under 21s gain £175m

2013 Budget:

Nothing

2013 Autumn Statement:

  • introduced the following measures hitting +65s: limiting foreign winter fuel payments (£20m)
  • introduced the following measures benefiting +21s: abolition of Employers’ NICs for under 21s (£1,945m)

Net Effect: under 21s gain £1,945m, over 65s lose £20m

2014 Budget:

As I have discussed here the 2014 Budget showed a yield from the introduction of pensions flexibility. That yield flows from the assumption that pensioners will choose to draw money from their pension pots earlier than they would otherwise have done, with a consequential acceleration of income tax receipts. The fact of this projected yield – of £3,045m – does not seem to me to justify the introduction of pensions flexibility as a measure “hitting” pensioners. I have also not included – as the expenditure thereon constitutes neither tax nor benefit expenditure – the initially (i.e. before today’s extension) projected £215m cost of pensioner bonds.

2014 Autumn Statement:

  • introduced the following measures benefiting +21s: exempting children from air passenger duty (£390m)

Net Effect: over 21s gain £390m.

If one nets off all of these figures over 65s have gained in changes in tax and benefits during the life of this Parliament £5,790m and under 21s have lost £23,535m.

Chicken or egg? I don’t really care whether the Tories have fed the demographic that keeps them in power; or pensioners vote for Tories because of their policies. And I’ll leave others to consider the question of fairness. But I will say this: my assessment of the answer to that question will be the decisive factor in how I vote come May.

Note: Updated on 8 February at 17.45 to correct a double counting error.

Further Note: the knowledgeable and helpful Heather Self – @hselftax (and well worth a follow) – has pointed out that the IFS has done a similar exercise showing the effects of tax and benefit reforms on household income. Here’s one of several relevant slides.

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The social construction of multinational firms’ tax behaviour. Guest post by @MartinHearson

This week I am trying to help the undergraduate students that I teach to understand a range of scholarship that uses social constructivism to study the political economy. When you go back to first principles to teach something you often see some of your own work in a new light, and that is what I am going to write about today. I’m briefly going to sketch out some social constructivist thoughts about multinational firms’ tax behaviour.

For a side project I’ve been reading some of the academic literature on tax compliance. There’s a great summary of the different theoretical perspectives on tax compliance in this working paper by Odd-Helge Fjeldstad and colleagues. The authors divide them into five:

  1. Economic deterrance. This is the classic rational choice framework, in which taxpayers weigh up the incentives, essentially the tax rate versus the penalty and the probability of being caught.
  2. Fiscal exchange. This is where the notion of ‘quasi-voluntary compliance’ comes in. If taxpayers think they will receive something in return – public services, in other words – they are more likely to pay. Although the evidence for this, according to the ICTD paper, is weak.
  3. Social influences. The final three positions, which I am going to appropriate into the social constructivist field, have stronger evidence to support them than fiscal exchange. The first is that tax compliance relates to perceived social norms: if they think their neighbours are honest, people are more likely to be honest themselves.
  4. Comparative treatment. From this perspective, people are more likely to comply with tax rules if they think the system treats them fairly relative to their compatriots.
  5. Political legitimacy. The final constructivist view is that if people trust the government and the tax authority, they are more likely to comply.

There are loads of empirical studies looking into the determinants of tax compliance behaviour among individuals and small businesses. It’s fascinating, but I think I found a big gap: I didn’t find a single study explaining the attitude to compliance among large businesses (or, to clarify, I found studies about staff compliance with management decisions, but not about compliance with externally-derived rules and regulations).

What do I mean by compliance? Trying to define this could easily veer into a discussion about tax morality, but that’s not where I want to go. We know that multinational businesses have a degree of choice over how aggressive their tax position is, and I want to ask, empirically, “what determines this?” Most of the existing work examining multinational firms’ decisions about their tax affairs tends, I think, to be situated in the rational choice, economic deterrance framework. According to that view, the first theoretical position listed above just needs to be adjusted to reflect the additional risks faced by businesses, in particular the reputation risk attached to aggressive tax planning (here is a paper that tries to do this empirically). Current discourse suggests that this risk is increasing, andbusinesses are revising their positions in response.

John Maynard Keynes

It all starts with Keynes…

This is where my undergraduate class comes in. We could argue that large business decision-making is more likely to be rational than that by small companies and individuals, because a successful large organisation has to create systems that obtain the right information and use it effectively. But a growing trend of political economy work, especially since the financial crisis, has focused very much on the fact that behaviour in financial markets (often by actors who are part of very large companies) can’t be explained solely through rational choices. My students are reading Andre Broome’s excellent introduction to constructivist international political economy, which refers to work in this vein on capital account liberalisation, european monetary union, and behaviour within financial markets.

Economic constructivist thought is often traced back to John Maynard Keynes’ analysis of how actors in financial markets deal with their inherent uncertainty. According to another useful book chapter by Rawi Abdelal and colleagues [pdf]:

Keynes lists “three techniques” economic agents have devised for dealing with this situation, all of which are inherently constructivist. First, “we assume that the present is a much more serviceable guide to the future than a candid examination of the past would show it to have been hitherto.” Second, “we assume that the existing state of opinion … is based on a correct summing up of future prospects.” Third, “knowing that our own judgment is worthless, we endeavor to fall back on the judgment of the rest of the world … that is, we endeavor to conform with the behavior of the majority or average…to copy the others … [to follow] … a conventional judgment.” In short, Keynes’ macro-economy rests upon conventions, that is, shared ideas about how the economy should work.

As the works cited by Broome show, this insight has been applied beyond financial markets to many other processes involving decision-makers and market actors. So why not multinational taxation? If we decide to do so, we can come back round to the theoretical perspectives I set out at the start. Perhaps the calculation about how much uncertainty to build into a company’s tax position is subject to the kinds of conventions identified by Keynes. And perhaps, beyond just uncertainty, the social conventions that influence business decision-making about taxation incorporate perceptions of social norms among decision-makers’ peers, as well as notions of comparative treatment and political legitimacy.

Here is one example, a quote from a survey of corporate tax directors [pdf] conducted by Judith Freedman and colleagues back in 2007 (and which it would be interesting to repeat now). There are remarks here that might support the fiscal exchange, social influence and political legitimacy theories:

One respondent said that his firm’s CSR policy does not extend to paying more tax than is due under the law; they are not interested in ‘making donations to Government’. Others echoed this view, arguing that they could spend their tax savings more wisely than the Government could. At least two firms suggested that there would be a greater social aspect to taxpaying if the amounts collected were earmarked for particular public services, rather than going into general revenue.

Social constructivists devote a lot of time to identifying and analysing the different groups among which social conventions form. There will be overlapping communities within and across companies, including for example the Davos elite, the tax function, social classes, nationality, and so on. I’ve written previously about a paper that touches on transfer pricing practitioners as a social group.

Corporate decisionmakers will have different information depending on their membership of different communities, but they may also be influenced by different social norms within their communities. This morning, for example, Chris Lenon suggests that corporate tax advisers are frustrated by what they see as a lack of rationality on the part of their boards, reporting “a gap between [tax advisers’] perception of the direction of travel in this debate and the denial of this at Board level because of the impact on earnings.”

I understand the normative case against using social norms to make up for deficiencies in the law, as well as the populist argument to the contrary. But I wonder if that debate might be seen in a different light if we begin from a constructivist ontology, in which, like it or not, social norms of one kind or another have always conditioned corporate tax behaviour.

[Ed’s note. Martin published this on his own blog yesterday. I am a big fan of Martin’s: he brings some academic rigour and by golly, I need it. You might do too.]

In which I ramble on, and on, about Inheritance Tax

It’s a strange tax, the Inheritance Tax. It raises, in relative terms, a vanishingly small amount of money – some £3bn of an aggregate tax take of almost £500bn. It is paid by a tiny number of people – some 16,000 per annum (3% of all estates). And yet it possesses a unique status as a kind of fiscal shibboleth, separating a ‘them’ and ‘us.’

Unique, unless of course we make the heroic assumption of a Labour victory in May, where it will be joined by a further shibboleth – someone out there will point out the plural, assuming also heroically, that a shibboleth is a notion such as can possess a plural – namely the Mansion Tax. That tax, too, will be paid by a tiny number of taxpayers. And as with the Inheritance Tax (remember Gordon Brown backing off a snap election when the Tories announced proposals to extend the nil rate band? It’s tempting to speculate on how different the political and economic landscape might now look had he held his nerve, fought and lost, leaving the Tories in control during the credit crunch. Tempting, but…) it’s a feature that dilutes not at all its potency.

I will allow myself this speculation though: one reason why they share this political potency might be that they are both wealth taxes. They get the newspaper barons up and out. For those, like me, who would like to see income taxes on productive strivers reduced in favour of wealth taxes on (in particular) economically fallow assets, it would be nice to think of the political success of the Mansion Tax – hugely popular with the electorate – as emboldening a future Labour Government or Opposition. Sadly, or so it seems to me, this Opposition has largely taken as its motto Matthew 5:5 – that the meek shall inherit the earth. But I’m yet young. I can wait.

You, on the other hand, might be less so. Where is he going, you might quite reasonably ask? I suppose it’s here: why is it that the Inheritance Tax – a tax paid by the donee on wealth she has not earned – is a political liability for Labour but the Mansion Tax a success? And the answer, I’d like to venture, is a matter of design. The Inheritance Tax is badly designed. It’s badly designed in technical terms. And it lacks popular legitimacy: it’ll only ever be a vote loser for Labour. The Mansion Tax, on the other hand, whatever its technical failings, is popular.

Poor technical design first. The cost of reliefs from Inheritance Tax is huge. The tax itself raises, as I have said, £3.1bn but the cost of the reliefs is more than seven times this at £22.4bn. Indeed, the real figure will be higher: the £22.4bn is the aggregate cost only of the 13 (of 88) reliefs from inheritance tax that HMRC publishes costs for.

True it is that much of that cost reflects a modelling decision. The joint nil rate band of £650,000 accounts for all but £4bn of the £22.4bn. And the level of the nil rate band reflects a political choice. The purpose and design of other reliefs is less clearly comprehensible.

Particularly difficult to understand is the privileged treatment given to agricultural property – holdings of farmland together with a ‘farmhouse’ on that land. The need to ensure food security might once have been advanced as a rationale for the relief. But if so, it is difficult to understand: the rationale is achieved by planning controls which limit the uses to which land can be put. However you tax the land, it cannot be used otherwise than to generate income through farming. Also ventured is the need to protect farms from being broken up on death: but I can understand neither why farmland should benefit from such privileged treatment nor how agricultural property relief achieves this goal.

As things stand, agricultural property relief is merely the latest and safest iteration of a kind of fiscal polo – the game played exclusively by the wealthy of ‘mitigating’ inheritance tax bills. Put your money into agricultural property and you can safely escape liability to inheritance tax. Indeed, with other mechanics for avoiding liability to the tax having slowly disappeared, farmland’s privileged status has seen its value – and indeed the cost of agricultural property relief – escalate sharply. The cost of agricultural property relief has tripled since 1999/00 whereas revenues from inheritance tax have remained broadly flat. This increase in the cost of the relief will partly reflect the increase in the values of farmland which have roughly quadrupled over that period (an increase itself likely to be a function of the slow loss of alternative inheritance tax avoidance mechanics). And it will also reflect the growing frequency of use of agricultural property as a token for avoiding inheritance tax – one that you buy old so that it sits, economically underproductive, in your estate for only a short period of time – and which changes hands frequently, forever being sold by younger to older hands.

I pause to note that, taxed as such, agricultural property does not derive its value from its capacity to generate income; this is likely to contribute to it being utilised less than optimally; and these effects are likely to be amplified by frequent changes of ownership. Anyway.

But what of popular legitimacy? The Tories, it has been widely speculated, plan to add to their raft of questionably funded tax cuts (in particular the increase in the income tax personal allowance to £12,500 and the raising of the point at which the 40p rate kicks in) by raising the Inheritance Tax joint nil rate band to a satisfyingly round £1m. Estates of a value below this figure will pay nothing, estates of a value above it may (because of the 36,000 estates valued at above the threshold, 20,000 did not have to pay inheritance tax because of the reliefs for which they qualified) pay 40% on values over it. This, they anticipate, and no doubt rightly, will be hugely popular.

A confession. Like Margaret Thatcher I am not a fan of shrinking the tax base. It might be politically expedient – everyone’s favourite tax is one that someone else has to pay – but it represents bad policy, rendering the yield ever more volatile and susceptible to economic and political shocks. I believe we should all pay something: an amount both reasonable and according to our means.

And the big problem with the current design of Inheritance Tax is that it fails on both scores. Why should those with estates less than the predicted £1m pay nothing? And why should those with estates above suffer a reduction in wealth of a number as high as 40%?

I’m not aware of any polling on the issue but I would hazard that the reason why changes to IHT are such a potent political weapon for the Tories is that the rate is so widely perceived to be too high. A 40% wealth tax on death is a tax set at a level as to lack legitimacy – and so to generate fiscal rebellion in the form of avoidance mechanisms. Gandhi’s Salt March is our fiscal polo.

Cut the confiscatory rate from 40% to 20%, lower the joint threshold to £500,000 (or lower) and fund the difference by abolishing agricultural property relief. And take a long hard look at the 87 other reliefs. There’s a truly radical reform. One which will reduce avoidance, be as close to tax neutral as matters, and be hugely popular.

[NB: for those interested, the distributional impacts of such changes would create a big loser of estates at £500,000 (which would see an increase in tax of £30,000). This increase would reduce until the estate hit £725,000 (at which point the changes would be tax neutral). Above this, and leaving aside the effects of abolishing APR and any other reliefs likely to fall hardest on the largest and hence best advised estates, it would generate winners.]