"Raising Capital Gains Tax to the same level as income tax was the litmus test as to whether the government was committed to tax changes that spread the pain of deficit reduction fairly and took the difficult decisions needed to secure the long term economic interests of the UK. It’s hard not to think that the government has bottled it."
"The government has fallen down on fairness at the first hurdle."
"How is it fair to maintain tax breaks to property speculators who add nothing to UK economic growth, who have made us more vulnerable to the effects of the credit crunch and who are, overwhelmingly, wealthy?"
Raising CGT to the same level as income tax was important in helping to dampen speculative investment into the UK housing market. It is also important in rebalancing the tax burden towards a fairer distribution between income and other forms of income.
The government has instead preserved the disparity between CGT and income tax. Basic tax payers will pay a CGT rate of 18% compared to their 20% levels of income tax, whilst higher level tax payers will pay a CGT rate of 28% compared to levels of income tax at 40%.
The past ten years saw property investment in the UK become dangerously based on expected capital gains – rather than based on a healthy rental income. This had a central role in driving up the housing bubble and increased the UK’s vulnerability to a credit shock.
Ms John continued:
"Hard working families and wage earners are being asked to pay more in tax than those who benefit from windfall gains from taking a punt in the housing market."
"More dangerously, it keeps in place the incentives for people to continue to take risky gambles in the housing market – doing little to address a key source of instability to the British economy".
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