I have been told by journalists that the IFS are putting it about that taper relief for CGT is not a good idea. Mr Chote, their Director, wrote an article in the Sunday Times backing the “Liberal/Lawson” view against taper relief. The IFS is a registered charity employing 46 staff (in 2008 – the last date for which they have published accounts) in receipt of a substantial grant from the Economic and Social Policy Research Council and with a membership, conference and publications income. They say their aim is to offer “objectivity and impartiality” in their approach to economic and tax issues, and to avoid party political argument. So let’s look objectively at the evidence they present on this sensitive political issue.
Mr Chote helpfully published the government figures for CGT receipts from 1978-9 to the present day. These figures are most revealing. They show that CGT was raising more than £4 billion prior to Nigel Lawson’s introduction of the 40% rate and bringing it into line with Income Tax. The year of the introduction saw a surge in revenues, followed by a long slump (1991-8) when revenues fell back below £3 billion and stayed there until 1998-9 when Gordon Brown introduced taper relief. Revenues rose back over £4 billion in 2000-1, only to be interrupted by the market crash of the early noughties.
His chart usefully shows that over the last 30 years in the UK CGT revenues have been at their lowest under the 40% regime and at their highest under the 18% regime. It shows that taper relief helped increase the revenue and income tax alignment helped depress the revenue.
Perhaps Mr Chote would like to recognise that my proposal of 40% CGT for one year gains, 30% for 2 year gains, 20% for 3 year gains and 10% for 4 year plus gains would be fairer and offer higher revenue than 40% on all gains. It would also meet the stated intentions of the Coalition agreement.