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Adjustments for Inflation

24.41. The Committee believes that a regular review of any rate structure set in the future for an integrated duty is fundamental to its proposals. When the rate of inflation is high, as at present, an annual review might not be too frequent. The effect of inflation in the past has been to cause values to rise and thereby render estates dutiable that would not, when the rate was set, have been liable for duty. In the case of larger estates, it has meant a greater fraction of the estate being taken in duty than would have been taken on the basis of earlier values. It has eroded exemptions. The effect of inflation is further considered in Chapter 6.

24.42. Under an integrated system, it is essential that gifts made at one time can be meaningfully related to gifts made at another time. A gift of $1,000 made now should have the same fiscal consequences, so far as possible, as a gift made ten years hence of


  ― 448 ―
the sum that is equivalent to $1,000 in present currency. It follows that gifts made and assessed to tax should be regarded as fractions of a slice or slices for the purposes of determining the rate of tax on each subsequent gift. It also follows that any change in the rate structure should be made in relation to existing slices. An adjustment to the rate structure to take account of inflation should widen each slice. A decision to vary the weight of the tax should be reflected in the rates applying to slices. An illustration of adjustments to take account of inflation and to vary the weight of the tax is given in Appendix B to this chapter.

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