Friday, May 14, 2010
ConDems 1st own goal on CGT
ToryGraph: Coalition government: outcry over Capital Gain Tax plans
Even me, as an uber bear, can't see this as workable.
Posted by doomwatch @ 09:22 AM (1578 views) Add Comment
36 Comments
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1. mrmickey said...
No fear, the bookies have this coalition priced at odds on that it will fall apart.
2. Wageslavex14 said...
They're just restoring the tax to where it was a couple of years ago.
Entrepreneurs selling businesses they had owned for more than 2 years used to pay only 10% tax. This then got abused by private equity bandits, so the Labour govt. went mental and abolished business asset taper relief (which didn't apply to houses, which were only ever taxed at 40%), doubled the CGT paid by entrepreneurs and halved the CGT payable on sales of second homes. When there was an outcry for people selling their business the Labour govt cobbled together some afterthought entrepreneurs relief, which wasn't particularly fair.
The old system was fine, and it is a good idea to restore it, subject to the inclusion of provisions which would prevent it being abused by private equity parasites (quite easy, this - just extend the time you need to hold the assets to 5 years before the relief applies - the Private Equity businesses would have gone bust within that time, so they wouldn't be interested anymore).
It's a good idea.
3. cat and canary said...
I like the way that the Torygraph article portrays this as a problem for entrepreneurs. When in fact the government has said "entrepreneurs would enjoy generous exemptions" for obvious reasons
...this CGT proposal is a problem for property speculators, that will be watered down in the end.
4. the number cruncher said...
Winging Tory rag
My business partner is very wealthy (Net worth 50m+) and pays an effective rate of tax on income of about 20% thanks to his very clever accountant . He made millions in a business then invested the lot in mostly commercial property about 15 years ago
I take a salary and pay an affective tax rate of about 60% (when you consider higher rate tax of 40%, my national insurance and the insurance my business pays - my businesses are both a not for profit business and a charity so I do not earn capital gains)
So CGT of 40 or 50% is perfectly fair, why should property speculators and other monopolists enjoy such a favourable tax position.
Oh how I wish for a Land Value Tax Man to sweep to power in the nation's moment of need
5. timmy t said...
Nobody seemed bothered that as a result of speculation, the prudent had their incomes wiped out by the ridiculous interest rates that became necessary. So I don't think that they, the ones who sought to profit from the speculation will get much sympathy that they are now losing out.
6. hpwatcher said...
So CGT of 40 or 50% is perfectly fair,
Fair - what is fair about taking away any incentive to want to invest ones money in other businesses?
Only a skint socialist would think it a good idea.
7. Fraggle said...
Not workable? Isn't this a return to rules that Darling scrapped not so long ago?
8. Fraggle said...
I'm also still trying to work out what entreprenurial activities actually require CGT exemptions. Surely the basis of all productive investment is a lump sum payment now for an improved income *stream* later. Surely anything else is speculation?
9. mystie010 said...
I hope BTL is taxed out of existence!! It is for lazy people who don't want to work but want other mugs to pay their mortgages for them. BTL is about wanting money for nothing and screwing tennants. I hope this ConDem government taxes these leeches on society out of all existence. To the BTL brigade 'Go and get a chuffing job like the rest of us have to!"
10. cat and canary said...
“We agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.”
11. the number cruncher said...
hpwatcher at 5
What a well thought out and reasoned augment - you must be so proud of yourself...
12. dbc reed said...
@tnc
Chris Huhne is the biggest land taxer in the business; Vince Cable has his moments (he hosted the big LVT meeting in Parliament)
They should make clear that if there is any backsliding on capital gains reform,especially as it takes in property values,they're going to resign.
13. Cheekie Charlie said...
"entrepreneurs would enjoy generous exemptions"
Can anybody sniff a loophole forming for the rich and well informed?
14. powerofnow said...
hpwatcher: what is fair about taking away any incentive to want to invest ones money in other businesses? Only a skint socialist would think it a good idea.
Housing is a moral issue; only the selfish greed obsessed would place their own self interests before the the basic needs of others in this regard. It's apparent to anyone who bothers to look beyond their own self interest that property speculation is a major cause of social problems.
15. flashman said...
hpwatcher has expressed a legitimate concern. Anything that stifles business investment could be a disaster for this country. The coalition government evidently agrees with him because they have promised generous concessions for business assets.
A large increase in CGT for non-productive assets is well overdue
16. flashman said...
number cruncher: The higher rate of tax is 50%, not 40%. You said yesterday that you were a very successful businessman. I was curious what you did but I now see that you operate 'not for profit businesses'. Are you defining succerssful, in terms of the money you make from these businesses, or in terms of the satisfaction you get from running charities?
17. timmy t said...
I agree with Flash - taking away the incentive to invest in business would cripple this country. But that is not what this is about so hpwatcher, fear not. But whilst we are on the subject of what's fair, what is fair about a system which taxes you more for money you earn through work, than money you earn through investment? That is morally wrong.
18. powerofnow said...
timmy t: what is fair about a system which taxes you more for money you earn through work, than money you earn through investment?
Yes but it's in the great tradition of loony taxes; Labour's Job Tax (National Insurance), Conservative's tax on trade (VAT) and the universally loved tax on work (Income Tax).....
***Insert your own comment about LVT being the only fair, sensible and just tax here***
19. growler said...
The Telegraph has articles that some people winge about - this is true. I only have to read a few words of AEP and Analtoe to reaffirm my belief some journalists are better off working for fund-raisers - that's if they don't already.
I think CGT or LVT on property is absolutely essential. I'm not a number-crunching spartakus league member, but we need to focus investors' interest on other assets. If they are to look at houses as an earner in competition with other investments, they they ought to pay tax as with other investments.
20. need-a-crash said...
When you consider that the vast majority of capital gains on property were "given" to homeowners by government engineering of the property market, it's surely only fair that they pay a fair share of it back in tax?
21. the number cruncher said...
Flashman @ 12
I have about 70 staff working in my organisations at the moment with a turnover of nearly 3 million and we deliver a lot of benefits for society, that's success in anybody's language, I also built it up from scratch over the last 8 years. There is no difference between running my 'businesses' and that of any other business. I rely on business activity to generate by income such as consultancy and people paying for they service we provide. I make most of our money by real business activity and not from grants from government like many not for profits do.
I have worked in the past for other charities and through my entrepreneurial drive I have raised tens of millions of pounds for them. The business processes I set up means those charities are still receiving a lot of that income on a yearly basis to this day.
I prize businesses that create real value for society as well as charities and I recognise the worth of the real business community. But I loath monopolists who make money by exploitation of limited resources or business that do not pay for the damage they cause to our environment or society.
I also measure my success by a range of metrics including charitable ones, such as the joy on the faces of in the 100,000's of school children, disabled children, young offenders and others that directly benefit from the work that I do.
What I do not understand is why you and Mr g cannot understand that it matters not if tax is on capital gains or normal income. It still stifles the drive of the taxpayer.
If you want to ridicule me for believing in a better society that is up to you, but I am very proud of my achievements, and the rewards I get from my life far exceed the personal fortune I may have forgone by not directing my energies into a more conventional business model.
22. urbanbear said...
If this affects real investors, and people like myself, who invest in precious metals to protect against the other theft called inflation, then I will have nothing but contempt for this tyranny, and up my game at frustrating them. If they piss people off, it will have consequences!
23. the number cruncher said...
urbanbear you are no more an 'investor' than a BTL landlord, you are a speculator - what on earth value do you provide to society by speculating in metals?
I highly suspect that your contempt is a product of your hope of huge capital gains made by a little gold hoarding.
I am constantly astonished that by the possession of an asset people think they deserve an income. This is the thinking that got us into this mess in the first place
24. cat and canary said...
well said number cruncher
25. flashman said...
number cruncher: I think you might be a little sensitive but I can see why that might be the case. I will admit to believing that most charities should be run by voluntary workers but I am equally sure you have the best of intentions and I am sure that in some circumstances there is a need for paid management. On the other hand, you have to admit that one of the great scandals of our age is how little of the publics charity donations get through to the intended recipients. I once read that more than 50% of all charity donations gets spent on consultants, guns and palaces.
Anyway fair play to you
26. growler said...
Hello Numbercruncher
If I'm Mr G, then you're mistaken as to what I'm saying.
What I do not understand is why you and Mr g cannot understand that it matters not if tax is on capital gains or normal income. It still stifles the drive of the taxpayer
I'm not advocating one type of tax over another.
My point is that there is no reason why first house gains should be tax free. My view is that gains made from house purchase/sale less expenses needs to be taxed just like any other investment vehicle. This would put speculation within the property market on the same footing as speculation anywhere else.
Even though I don't have red socks, I see it as immoral versus those that have no capital that owners of capital have to pay tax on corporates, commodities and whatever else they do - including working on PAYE - yet can buy a pile of bricks and not pay tax at all.
Just like any other industry, if it isn't taxed - it will be promoted. There is no check-and-balance. No competition. The UK property stock is a monopoly if you like. The limiting factor is peoples ability to pay the price.
And when that limit is hit, our institutions change the rules - thanks to our supine Goverment and regulators - and onward it goes.
Let's stop funding this. Tax it as all other trade. It won't kill the property market: It will just work to stop the inflation machine.
I hope you don't think I've outed myself as a comrade. By all your other measurements, I would qualify for "total Tory" status. To reassure you, I used to be a card carrying one in FCS days.
But "times is changing" - as they say. Banging on about the old class system, "Tory wingeing", etc etc as with other topics you have commented on does give the impression that your view is cast in pre-fabricated concrete of the 1960s.
27. flashman said...
growler: I thought he was talking to that other blogger who is actually called mr g??? Mind you, I don't know why it was aimed at me either because I didn’t comment on anything that could attract the comment (and nor did the real mr g). I think there are a few wires crossed here.
28. growler said...
Hi Flash. Suppose so. But there are many crossed wires and inconsistencies
I'm trying to work out what as asset is versus a service or product:
I am constantly astonished that by the possession of an asset people think they deserve an income
verus the statement
I rely on business activity to generate by income such as consultancy and people paying for they service we provide
29. the number cruncher said...
Flashman - respect, you are thinking a little deeper and understanding that lefties like me can be economically productive, hard working and have a good grasp of the free market and economic efficiency.
But I have heard it said that most of the right wing press love giving their selfish readers reasons to justify not supporting charitable causes, unless its celebrity laden gala events in their society pages or to jump on some bandwagon.
If you want to support a charitable cause then make a donation, if you are really bothered by the efficiency of its operations then read their annual reports or even become a trustee. Please do not just sit in the safe, but false, position that a charitable donation is wasted. The charity Commission's website has a full financial history of all charities and accounts are set out in a much clearer, standardised fashion than businesses. www.charity-commission.gov.uk
Most charities do a brilliant job, in difficult circumstances. My salary is determined by my trustees and I have just refused a substantial salary increase they offered me and taken the same as the rest of the team (much to the annoyance of Mrs number cruncher).
30. fjcruiser said...
This article is very misleading. The current government wants to encourage long term investment instead of short term speculation. I think the idea of re-introducing taper relief makes good sense. The reason the previous government changed the rules about CGT was they were all buying / selling second homes.
When the CGT was at 40% it did not discourage investment whatsoever. Lowering it increased short term speculation and the rise in property values whichbenefited certain people in power.
31. flashman said...
grolwer: I might be able to cast some light on the first of those two statements
"I am constantly astonished that by the possession of an asset people think they deserve an income"
This ignores the risk that the holder of an asset took when it was purchased. Where there is risk there is always reward or loss, in direct proportion to the risk taken. It also ignores the benefit of the investment contribution that is often derived from the sale and purchase of the asset. The stock market is designed to attract investment by the selling of shares/assets and if people did not derive any income from holding assets, the economy would revert to the Stone Age because there would be very little investment. Imagine what would happen if people did not bother investing in technology or medicine. It is in all our interests that people who hold assets related to these types of investment should be allowed to derive an income from their assets.
I do not therefore think that we should heavily tax productive or business assets. I do however think that we should apply a higher rate of CGT to unproductive assets like gold and rental property.
32. flashman said...
number cruncher: "But I have heard it said that most of the right wing press love giving their selfish readers reasons to justify not supporting charitable causes, unless its celebrity laden gala events in their society pages or to jump on some bandwagon".
There you go again. Can you not see the irony in your wildly uncharitable comments? It is not appropriate that you should vindictively politicise charitable contributions, in this way. Do your trustees or contributors know that you make this kind of comment?
You really are a monomaniacal class warrior and I will not enter into any further discussions with you.
33. mdmick said...
I have studied my callanetics model and the solar plexus indicates that gold is going to do quite well.
Despite CGT, gold may well be a better investment than regular stocks and shares - over the next 2 to 5 years since I can not see our deficit being optimistically looked upon during that time frame.
Any good conspiracy theories today? I read this one about market manipulation and wonder if anyone has an opinion.
http://www.huffingtonpost.com/tom-pappalardo/silver-and-gold-markets-a_b_576250.html
Mike
34. urbanbear said...
Have a look at the LBMA and you will see why investment grade Gold Bullion is tax free, the reason is, a massive volume is traded daily, effectively as money, because it holds its value better than fiat currencies! Some economists may slander Gold it as a "barbarous relic", but several central banks still keep substantial amounts, and have sold far less in recent years; I wonder why?
It doesn't matter if Gold is an unproductive asset, it is a store of value, so are all forms of money and money substitutes, like fiat currencies, so no one, in their right mind would dare to tax you on the money or fiat currency sitting in your wallet, just because it could buy more of some other thing, like say fiat currency, however if you hold fiat currency, this IS effectively taxed continuously by inflation, because the state and banks keep devaluing it via inflation and greater debt.
Have you not wondered why house prices actually rose, just maybe enough people thought houses are/were a better store of value than money, especially after Brown Bottom gutted pensions; only later did greed kick in!
35. alan_540 said...
And there you have my loathing of Brown - he stole my pension.
36. urbanbear said...
mdmick,
As some LBMA members have pointed out, this idiot trader talked about leverage, when it was/is actually ratio. Future contracts, by implication, do not have physical metal attached to them in present, given the whole point of futures is they promise delivery of something in the future; this something doesn't have to be Gold or Silver, it can be just the equivalent value of Gold or Silver, or just exchange of physical ownership in an approved Vault. Options, e.g. Shorts, are just the right to buy or sell a future contract at a defined price, and like futures require both buyers and sellers, who agreed terms. Astonishing amounts of trade occur in the LBMA and other trading, and virtual ownership is probably used because it is probably far less expensive than shifting Gold between vaults or areas in vaults.
Personally I do not yet have the risk tolerance, and time, to have anything but un-leveraged 1:1 ratio allocated Bullion in the LBMA and abroad. I do however have managed 'high' risk exposure to Precious metal and various other natural resources in my pension.
I have also just transferred the last of my pension fund exposure out of G7 countries, into emerging economies, because I have no investment confidence in any of the G7 countries, especially not the UK, the Euro-zone shambles, and the USA.
If the UK people want me to invest my hard earned wages in the UK, they need to kick out this ridiculous Con-Dem-ned coalition management, and get in some management who prove they understand genuine Capitalism, by their actions, not the current bankrupt Theocratic-based Corporatist and Marxist Oligarchy, many mistakenly call a democracy.