When introduced in 1885, gift duty was meant to serve two purposes: to prevent people sidestepping the estate duty rules and to increase revenue.

The first reason for its existence disappeared in 1992 when estate duty was abolished. The second has also withered progressively and is now virtually non-existent. Gift duty has brought in an average of just $2.3 million annually over the past seven years, and on a declining trend.

On those grounds, it fails to satisfy even those who harbour the antiquated view that the role of the tax system is to redistribute income. Surely no one will mourn its passing on October 1 next year.

Just about the only people who have been affected by it in recent years have been those caught unawares. If it was an annoyance, it was only because of the compliance cost to taxpayers and the minor inconvenience of setting up "gifting programmes" to avoid the duty when transferring wealth within families.

Such programmes have been commonly used to place assets in family trusts. But they require annual deeds of forgiveness to be filed to Inland Revenue by lawyers or accountants, who typically charge about $300 apiece. In sum, that equates to about $70 million a year in compliance costs.

Quite why gift duty has survived so long is a mystery. Philosophically, the Bolger Government might have been expected to ditch it when it abolished estate duty.

Yet somehow it thought the duty could still be useful in preventing people from gifting away large assets where this may allow them to evade creditors, minimise income tax liability or qualify for means-tested welfare benefits, notably in rest home care. The then Finance Minister, Ruth Richardson, suggested gift duty must remain until measures to restrict avoidance were analysed and introduced.

The Revenue Minister, Peter Dunne, says, however, that the protection offered by the duty in the areas that concerned the Bolger Government has only ever "been incidental and very limited". He is right. A broad range of other legislation, such as insolvency, companies and property law legislation in the case of creditors, provides adequate protection to mitigate the identified risks following the abolition of the duty.

In fact, that risk has always appeared overstated, given the ease with which people were able to avoid gift duty. Further, the incentive to minimise tax obligations through gifting to trusts has been reduced by the alignment of the top personal tax rate and the trust rate at 33 per cent.

Perhaps the only real matter of potential concern with the duty's demise will be the issue of qualification for means-tested benefits. That, however, is already an area being scrutinised by the Government.

Most fundamentally, the concept of gift duty belongs to a different age. Breaking up large estates and accumulations of riches harks back to a time when tax collection was seen by many as a pretext for assailing the wealthy.

Today, most would regard it as an attempt to penalise those who, through their own efforts, have accumulated assets throughout their lives. Gift duty kicks in at $27,000 over a 12-month period and is the subject of a sliding tax scale. This means farmers, for example, find it difficult to hand on their land before they die.

The McLeod tax review of 2001 recognised the duty was punitive, inefficient and unfair. It recommended its demise. Others in the same field have long described it as an archaic tax that serves little or no purpose. Even Inland Revenue has largely given up on it. It has been many years since it dedicated significant resources to enforcing it.

Philosophically, the duty's time has passed. Practically, it has long since ceased to be useful.