Pressure is mounting on the Government to cut Capital Gains Tax following Liam Fox’s call for a 3 year suspension and a ‘pointmaker’ paper by the Centre for Policy Studies which says that the tax is too high even by the Treasury’s own analysis.
Former Defence Secretary Dr Fox told The Times that the Government should, for at least three years, abolish Capital Gains Tax, a key (but permanent) proposal of our 2020 Tax Commission’s Single Income Tax, to “do something that ricochets around the world”:
We should simply throw down the gauntlet and say that we are cutting our taxes, we are making Britain more competitive, we are going to reform our labour laws, make hiring and firing easier and do what we know works because it’s worked before.
The Centre for Policy Studies, meanwhile, has published The Case Against CGT, pointing out that if the Treasury thought that 28 per cent was the revenue maximising rate when Income Tax was 50 per cent, due to the incentive to disguise income as capital gains because of the gap between the two rates, 28 per cent must logically be higher than the revenue maximising rate when the top rate of Income Tax falls from 50 to 45 per cent in 2013. The paper also states:
The overwhelming conclusion of the economic literature is that the optimal rate of CGT is zero. If the Coalition really does want to increase economic growth by being bold in tax reform, that should be its goal.