I SPOKE TO Joy Burden on Monday. The 88-year-old sees her case against inheritance tax, which went to the European Court of Human Rights yesterday, as a moral one. Joy and her 81-year-old sister, Sybil, have shared their house, built for them by their brothers, for more than 40 years. They are challenging the Government to give them the same exemption against inheritance tax as that enjoyed by married and cohabiting gay couples in a civil partnership; as things stand, when one of them dies, the other will be forced to sell the house to pay the death duties.

“We’d leave this country if we weren’t so old,” Joy told me. “It’s so awful to live in. There’s no incentive for people to make money. People who didn’t save a penny will be brought up level with those who did.”

And that, in a nutshell, is the argument against inheritance tax, the most emotive of all the government levies. The Tory Shadow Chancellor, George Osborne, once told me he received more letters on this subject than on any other. Last month Stephen Byers rattled the Chancellor’s cage by proposing the abolition of inheritance tax in the name of modernity, a suggestion swiftly and publicly slapped down by Gordon Brown’s ally Ed Balls as an uncosted, “short-term sectional gesture”.

It’s easy to cost it. Inheritance tax raises £3.2 billion a year compared with, say, stamp duty, which raises £11 billion, the £8 billion from tobacco duty or the £136 billion from income tax. It accounts for 1 per cent of government revenues.

The arguments in favour of the tax are not just practical (where else would we find the money?) but ideological, even envious: that large inheritance is somehow unfair and should be frowned upon if not very substantially curbed. But its effect is exaggerated. The inheritance of property is far less significant in fostering an unequal society than the purchase of better education through the private school system. If nobody was allowed to buy their way into educational advantage, it doesn’ t seem to me that huge inheritances would matter much of a jot.

Taxing inheritance doesn’t go very far towards equalising society. It bites harder at the upper end of the middle classes who scrape into its net than it does at the very wealthy who might just have to sell off a cottage or two to pay off the dues on a large estate. But it only kicks in after £300,000 (in 2007-08), which is a fairly hefty inheritance in itself. And it isn’t as if the state takes everything after that; just 40 per cent of it. Only 6 per cent of estates are even subject to death duty because the rest are too small. There is still plenty of incentive left to save for one’s family.

The real problem with inheritance tax is where it unfairly deprives a person who has just lost a loved one of their home as well. Hence the exemptions for married couples and, more recently, those who have signed up to civil partnerships. This doesn’t do anything for the Burdens, who as sisters cannot form a civil partnership. Two old friends living together would have to lie about having a sexual relationship in order to qualify.

I have a friend in a sort of similar dilemma. Her husband died four years ago, leaving her with three young children and a large dilapidated house that they were in the process of rebuilding. She supports them all herself, by working. There isn’t anything left over. During a recent cancer scare she spent her time worrying that were she to die, her children — who have a relative who is happy to move in and care for them — would lose their home at the same time as their last surviving parent, because obviously they cannot afford to pay a large tax bill. She supports the principle of paying inheritance tax, but thinks it should be deferred until the youngest child is 18. Isn’t that what a reasonable state would do?

The tax is riddled with unjust inconsistencies that a benevolent government would try harder to iron out. Were a woman to live at home caring for her mother for the last 20 years of her life, she should be allowed to stay on in the family home until her own death. The inheritance tax will bite in the end anyway.

Lawyers think that the Burden sisters are likely to lose their case. When the Civil Partnership Bill went through Parliament in 2004, the Government rejected amendments that would have included people such as the Burdens in the new legislation but promised to re-examine the issue later. Nothing has happened since; the Law Commission is looking into the position for people who live together in “common law” partnerships, but excluding carers and relatives.

Part of the problem is that it is extremely difficult to draft exemptions that would not be open to abuse by those simply trying to avoid inheritance tax: if you included carers, for instance, for how long would the couple have to be living together to qualify? Would the carer have to have lived there all the time to claim the exemption, or would five days a week suffice? Four days? And how would you prove it? If you exempted the Burden sisters and the surviving one then allowed a niece to “move in”, would the niece subsequently be exempted when the second sister died?

It should be decided on a case-by-case basis. It sounds as if the sisters’ inheritance tax will amount to at least £200,000, and there are hundreds of others like them each year: surely the sort of sums that would justify funding some kind of tribunal to decide how and when to collect the duty in deserving cases such as this. And why not introduce an exemption or deferral for someone like my friend, whose children, and their dependence, and their cohabitation, are easy enough to prove?

If the State cannot be bothered to make a real attempt to iron out such blatant inequity, then it might be better, as they have done in Australia, New Zealand and Canada, to scrap inheritance tax altogether. No, I didn’t expect ever to find myself saying that.

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