Call for Death Tax to Boost Charitable Giving

Not for Profit leader and Chair of Community Council for Australia, Tim Costello, has called on the Federal Government to create a death tax for the super rich as a way of boosting charity sector funding.

Costello, who is also the CEO of World Vision Australia, said a death tax would be much fairer than the GST and could create up to $100 million in new donations going straight to charity while providing the Federal Government with at least $5 billion of new revenue.

He said the new tax would only affect the super rich and would dramatically increase giving.

“An estate duty would give Australia’s super rich many more reasons to bequest money to charities,” Costello said.

He said a new estate duty tax or death tax would reduce the growing gap between the very rich and poor and would also reduce inherited inequality.

“These kinds of taxes have been used for years successfully by many countries including the UK, Germany, Italy, France, Belgium, Canada, the Republic of Ireland and some states in the USA,” Costello said.

“At least $100 million in additional donations could be going straight to charity if the Federal Government green lights the idea of estate duties.

Costello told Pro Bono Australia News that with a threshold of $5 million before the death tax kicked in, it would only affect 1 per cent of the population.

Conscious of the impact the terms “death tax” or “estate tax” had on the general public, he said he was sure that there would be a scare campaign to try to knock it down.

“The debate [around tax reform] is toxic at the moment, there’s an $80 billion shortfall and the GST has died,” he said.

He said all donations and bequests to charities should be totally exempt from estate duties, so the more people gave to charity, the more they would help others while reducing the tax burden on the estate.

“The message for the sector is that donors would be exempt from the tax if they gave it to charities,” he said.

“If you have over $5 million and you structure it so that 35 per cent of your wealth is going to charity there would be a massive discount [in the death taxes].”

“Put simply, if built correctly, this tax could unquestionably help finance social needs in the decades to come. We urge the Federal Treasurer to look at this idea. It is an income option that cannot be ignored. There has never been a stronger case for an inheritance tax.

“It is estimated that within the next 50 years there will be nine million Australians aged 65 or older. There will be more wealth to hand down and fewer of us paying income tax. This is a tax that makes total sense in a country getting older and richer.”

Community Council of Australia CEO, David Crosbie, said Australia was totally out of step with the rest of the world.

“Inheritance tax in the UK is now at a 35 year high. The so-called death duty there raises US$7 billion for the government. In Belgium, 1.4 per cent of the country’s overall revenue comes straight from a death tax,” Crosbie said.

Crosbie said now was the time for Australia to talk about death and taxes and realise an estate duty is the fairest and the most painless tax to move forward with.

“It would only affect the richest part of the community, after their life is over. This kind of tax is much fairer than an increase in the GST,” he said.

“It is extraordinary that at the current time 0.3 per cent of the nation has wealth of over $10 million.”

Death duties were abolished in Australia in 1981.They were revisited in the Henry Tax Review, by former Treasury Secretary Ken Henry, in 2009 in which he suggested that death duties and particularly an estate tax could have a place in a revamped tax system.

Independent policy think tank, The Australia Institute (TAI), has backed the charity sector call for the re-introduction of estate duties.

TAI released a paper, Surprise Me When I’m Dead: Revisiting the Case for Estate Duties, which analysed the role estate taxes could play in Australia to raise revenue and address inequality.

“Congratulations to Tim Costello and the Community Council for Australia for bringing estate duties into the tax reform debate,” Executive Director of The Australia Institute, Ben Oquist, said.

“Unfortunately, the idea that estate duties are politically impossible in Australia has become an article of faith.

“But the ‘everything on the table’ tax debate a country with a revenue problem must have should include a tax that is fair, simple and productive.

“One model would exempt everything up to $2 million and impose rates of 20 per cent thereafter and 30 per cent above $10 million. The estimated revenue boost would be $5 billion per annum.

“The model that we looked at would raise $5 billion a year, and only effect a few of the very wealthiest. In the words of the Prime Minister, ‘those who can afford to pay’.”

Oquist said estate duties have a major role to play in addressing the increasing inequalities in Australia.