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Osborne faces calls to cut CGT to boost savings and investment

by Alex Steger on Nov 30, 2012 at 08:49

Osborne faces calls to cut CGT to boost savings and investment

Chancellor George Osborne has been urged to reduce the main rate of Capital Gains Tax (CGT) to 25% by a think tank.

The Centre for Policy Studies has called on Osborne (pictured) to reduce CGT from its current main rate of 28% to 25% in his Autumn Statement.

It argued the tax was economically bad, discouraging entrepreneurship, savings and investment, reducing economic growth.

It added that CGT distorted capital markets by encouraging individuals to hold on to assets that would be better off under different ownership, and channelled funds into tax exempt assets rather than those with the highest return.

A report by the Centre of Policy Studies said: 'There is no excuse for the Treasury not to cut CGT immediately to about 25% (which is where the Treasury model would suggest it should now be to maximise revenue). Even further, we consider the Treasury’s assumptions too pessimistic. Returning to the flat rate 18% rate would cost between £300 million and £900 million under their pessimistic assumptions, but bring with it a positive impact on economic growth.'

The think tank also called for the government to set out a time table for the abolition of National Insurance Contributions.

15 comments so far. Why not have your say?

sol trader

Nov 30, 2012 at 09:08

Ha, was that a think tank of hedge fund managers?

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Anitaki

Nov 30, 2012 at 09:27

Wrong call

The money will be used for investing in second homes and increasing bank borrowings again (the reason being that the public have lost faith in the more traditional investments, and buy-to-let does provide income). Pensions don't, and anyway, its becoming far too complicated to get one!!

Osborne should never be given any credibility

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Keith Cobby

Nov 30, 2012 at 09:28

NI and income tax should be combined and set at a flat rate. CGT, corporation tax and tax on interest and dividends should all be at the same rate.

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Dave

Nov 30, 2012 at 09:47

reducing the CGT rate by 3% would just be fiddling whilst rome burns. Very little point to it. I don't think it would make the least bit of difference to investor behaviour

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Chris Holmes

Nov 30, 2012 at 10:13

Centre of Policy Studies was founded by Keith Joseph and Margaret Thatcher, which gives some insight in to its political inclinations. No surprise then that it advocates a tax reduction on gains - and presumably will have some influence in Gideon... sorry... George Osborne's idiosyncratic handling of the economy, where rhetoric and action are opposed.

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Arthur Schopenhauer

Nov 30, 2012 at 10:20

what causes the distortion is the unequal taxing of different money flows

If they put a 20% flat tax in place and stopped the double tax on dividends they might encourage profit which would be taxable and like other flat rate countries they would simplify the tax system reduce cost of tax collection and make avoidance more difficult

This is just a "Bush" tax break for the rich and further encouragement to characterised income as capital gain form our accounting overpaid fiddlers

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Chris Holmes

Nov 30, 2012 at 10:31

Correct, Arthur, or you might even go one step further, as Osborne did, in flipping your second home and avoiding capital gains tax altogether. Tax 'avoidance' is morally wrong....unless you are the Chancellor. Hypocrisy reinvented.

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Alan Lazenby via mobile

Nov 30, 2012 at 10:45

The revenue love complexity, it keeps them in a job. A minimum tax on all forms of gain should be in place set at 20%, this would ensure all individuals paid a fair rate of tax and would reduce the cost to the treasury.

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Arthur Schopenhauer

Nov 30, 2012 at 10:51

@ Chris Holmes

My friend was the adviser to two ex Chancellors they apparently could not count

Did you know that they get the full pension after one days service along with the Prime Minister and the Attorney General.

This seems to be outside the £1.5M cap or the annual £50K allowance They don' think Pensions are complicated

Read Animal Farm all will be revealed

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Chris Holmes

Nov 30, 2012 at 10:59

@ Arthur Schopenhauer

I read Animal Farm in one sitting as a 14 year old. Should be compulsory.

I posted previosly that the MPs' pension is scheme is not registered so not only can they build provision elsewhere within LTA through extraneous activities (read the Register of Members' Financial Interests to demonstrate how part-time being an MP can be) BUT we pay the tax on their unregistered benefits!

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Arthur Schopenhauer

Nov 30, 2012 at 11:12

@Chris Holmes

Then you will enjoy

The economics of innocent fraud

Truth for our time

written in 2004 by J.K. Galbraith

http://www.amazon.co.uk/s/?ie=UTF8&keywords=economics+of+innocent+fraud&tag=googhydr-21&index=stripbooks&hvadid=8915470113&hvpos=1t1&hvexid=&hvnetw=s&hvrand=8547332521133015543&hvpone=&hvptwo=&hvqmt=e&ref=pd_sl_8khyt846b7_e

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Keith Cobby

Nov 30, 2012 at 12:09

Arthur : I agree with you about Animal Farm which happens to be my favourite book.

It seems to be referenced everywhere, the new president of Egypt should be named Napoleon!

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Richard Hardy

Nov 30, 2012 at 12:39

Flat, same rate rate tax for every taxpaying entity then less inclination to look at options to avoid payment.

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Arthur Schopenhauer

Nov 30, 2012 at 12:56

http://news.bbc.co.uk/1/hi/business/4444717.stm

It is not a new idea but it did work very well for HK from 1948

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Usually found sitting on the fence

Dec 04, 2012 at 12:26

Those calling for a flat rate are right, but it is how you introduce it that counts. How can you introduce a single flat rate without making adjustments to prevent those who earn minimum wage not feeling so aggrieved that there seems little else to do than attack the rich who keep on giving to the rich?

How do you propose telling the unemployed and disengaged 16-25 year olds that there is little money for them, when handing the £1million earner a yearly cash boost of approx. £300k (assuming a flat 20% tax)? How without royally cheesing them off?

While I agree it is correct, a flat simplified rate, it needs a long term strategy, built in and integrated over the terms of money Parliaments, and not just to ensure the political survival of the current/next bods and beyond.

Sign up the big corporates to a socially responsible model, where top execs commit to salary sacrifice throughout their workforce to maintain there current disposable income levels. Encourage these same firms to increase lowest paid earners to receive reduced corporate tax liabilities. Result, better paid (former min wage) workers and making that organisation more desirable to work for. Top execs maintain their disposable income...

There will need to be rules and policing and companies in breach of their social responsibilities (such as hiking up top exec pays while freezing other staff members pay, or claiming to have increased staff pay when they have not)

The current system and the years before have distorted it to a point where fair taxation, pay and benefits would appear to be a pipe dream!!

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