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A study by the Centre for Economic Performance (CEP) at the London School of Economics, claims that generous inheritance tax allowances are encouraging a generation of poorly managed family firms.
The research said 100% inheritance tax exemption for most family firms mean owners are encouraged to simply pass their business onto their children – usually the eldest son – rather than bring in an external boss, who would be more likely to stimulate growth and improve management practices.
CEP director Nick Bloom commented: “Many traditional family firms have bad
management practices. They lack effective monitoring, have dysfunctional targets
and limited incentives for staff.
“These traditional family firms account for half of the UK’s long tail of badly
managed firms in our survey, and around a third of the UK’s productivity gap
with the United States.”
Bloom also called for inheritance tax exemptions should to be capped at £1
million, so that small firms would remain exempt although medium and large
businesses would not.
Such a reform, he argued, would raise £250 million for government spending and
improve UK productivity helping it to compete better with international
competitors.
Source:
RedAlert
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