III. Adjusting the Rate Scale

24.B3. In paragraph 24.42, the Committee has indicated the principles that must be followed in changing the rate structure and in relating gifts made at different times. These principles are now illustrated.

24.B4. If it is decided to adjust the rate structure to take account of inflation of say, 10 per cent, each slice would be increased by 10 per cent. The scale in paragraph 24.B2 would become:

Former slice   Rate   New slice  
$’000  per cent  $’000 
0–60  0–66 
60–120  20  66–132 
120–200  30  132–220 
200–300  40  220–330 

24.B5. If it is then decided to increase the weight of the tax, the marginal rates would be increased. The scale would then become:

Value of estate   Rate  
$’000  per cent 
66–132  22 
132–220  33 
220–330  44 

24.B6. If a person makes a gift of $92,000 when the scale in paragraph 24.B2 applies (all previous gifts being exempt), the duty will be $8,000. A gift of $92,000, when grossed up, will represent the whole of the first slice and two-thirds of the second slice. Thus, if the scale is revised in the manner indicated in paragraph 24.B5, the balance of the second slice available to the donor will be one-third, i.e. $22,000. If the donor dies when the scale in paragraph 24.B5 is in force without having made any other taxable gifts and with an estate of $40,000, the estate (assuming no exemptions apply) will attract duty as follows:

22 per cent of $22,000  4,800 
33 per cent of $18,000  5,940 

  ― 481 ―

It will be noted that the gift duty on any gift is finally determined at the time of the gift and expresses the weight of tax then applying.