Cgt - The Treasury Cutting Of Its Nose To Spite Its Face

[Boom Boom]

There's been an awful lot of nonsense written on this forum about the proposed changes to CGT. How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected. If this move is intended to address the deficit, and not simply a 'soak the rich' policy, what is the point of it if the result will be to make things worse? Will Sir Wince of Cable be prepared to stand down in a year when the figures show the increase in CGT actually lost the treasury revenue?

[The Masked Tulip]

There's been an awful lot of nonsense written on this forum about the proposed changes to CGT. How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected. If this move is intended to address the deficit, and not simply a 'soak the rich' policy, what is the point of it if the result will be to make things worse? Will Sir Wince of Cable be prepared to stand down in a year when the figures show the increase in CGT actually lost the treasury revenue?

Can you provide historical data prooving that it will result in less revenue? This just appears to be right-wing Tory spin IMPO.

[non frog]

.... How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected....

How about all the nutters that want rich people to avoid paying tax deal with the fact that they are just repeating some drivel they have read written by rich people in nutter newspapers?

[Georgia O'Keeffe]

Can you provide historical data prooving that it will result in less revenue? This just appears to be right-wing Tory spin IMPO.

and also show the reduced tax take has nothing to do with the fact it is normally universally increased when income and corporate tax takes are reducing, ie in recessionnary conditions, you know when prices are err falling and capital gains reducing

Edited June 20, 2010 by Tamara De Lempicka

[Johnny Storm]

There's been an awful lot of nonsense written on this forum about the proposed changes to CGT. How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected.

No one here cares about the governments tax take. They just hope that this move will force people to sell quickly, cheaply and therefore start the long fabled HPC.

[Boom Boom]

Can you provide historical data prooving that it will result in less revenue? This just appears to be right-wing Tory spin IMPO.

http://adamsmith.org/files/capital-gains-tax.pdf

Figures are all there.

[alexw]

There's been an awful lot of nonsense written on this forum about the proposed changes to CGT. How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected. If this move is intended to address the deficit, and not simply a 'soak the rich' policy, what is the point of it if the result will be to make things worse? Will Sir Wince of Cable be prepared to stand down in a year when the figures show the increase in CGT actually lost the treasury revenue?

Give us independant non-biased proof of your statements, i.e. not from the same nutjob (Adam smith institute) think tank that came up with the poll tax thinking it was a jolly good idea.

[alexw]

http://adamsmith.org/files/capital-gains-tax.pdf

Figures are all there.

Sorry but i'm not going to even bother to read let alone believe figures from the same think tank that came up with the poll tax. Give us a study from a non-partisan non-nutjob group.

Then your arguments might be worth considering

Btw this is the same group that thought selling off the council housing stock would improve the quality and price of the uk's rental accomodation, and who's advice much to our detriment margret thatcher followed. Given all of this i'm wondering why even you believe a word of what they say.

Edited June 20, 2010 by alexw

[Boom Boom]

Give us independant non-biased proof of your statements, i.e. not from the same nutjob (Adam smith institute) think tank that came up with the poll tax thinking it was a jolly good idea.

The figures don't lie, whatever you think about the ASI(I don't particularly rate then either) the figures and the report they quote spelt it out very clearly. How about this for example...

One myth that is consistently peddled by advocates of higher capital gains

taxes is that lower capital gains tax rates will somehow result in people

shifting income to capital gains. The facts do not bear this out. If it was so

easy to convert income to capital gains then how do countries who have a

GCT rate of zero still manage to raise significant revenue from income taxes?

You have an answer to that?

Edited June 20, 2010 by Boom Boom

[rxe]

Give us independant non-biased proof of your statements, i.e. not from the same nutjob (Adam smith institute) think tank that came up with the poll tax thinking it was a jolly good idea.

The idea that CGT is largely a voluntary tax is valid. If you don't sell, then you don't pay it. So unless you have to sell, if the rates are high, then you hang on to assets. My own example is a house (my wife's first house), bought in 1995 for about 45K, now apparently worth £250K. Say there was 50% CGT after the budget, so if I sold it, I'd pay £100K to the government. To sell as an asset shift in my investments would be barking mad - I'd have to be so confident of whatever else I was investing in, that I'd be willing to lose £100K. My new asset would need to have double the yield of the house. Stuff that, I'll keep the house and carry on renting it out.

CGT may well lead to a surge of selling before the tax comes in, but I think it will simply prevent properties that are investment assets coming onto the market afterwards. 40% CGT (same rate as IHT) leads to a "I'll keep it till I die mentality.".

[Realistbear]

There's been an awful lot of nonsense written on this forum about the proposed changes to CGT. How about those in favour of this move deal with this fact; higher CGT rates almost universally result in less revenue being collected. If this move is intended to address the deficit, and not simply a 'soak the rich' policy, what is the point of it if the result will be to make things worse? Will Sir Wince of Cable be prepared to stand down in a year when the figures show the increase in CGT actually lost the treasury revenue?

If it gives BTLers and multiple home owners a disincentive to carry on with their destructive speculation it will be a good thing.

The housing bubble has been the ruin of this country and it should be singled out for punitive taxation.

Gordon should go to the Tower.

[Boom Boom]

If it gives BTLers and multiple home owners a disincentive to carry on with their destructive speculation it will be a good thing.

The housing bubble has been the ruin of this country and it should be singled out for punitive taxation.

Gordon should go to the Tower.

And to hell with collateral damage?

[Realistbear]

And to hell with collateral damage?

The collateral damage has already been done. Our economy is in ruins and it is related to housing bubbles. Now is the time to prevent the next one forming by introducing tax as a disincentive to property speculation.

Leave shares and business investment alone but hit the self-styled "entrepreneurs" of BTL and those whose greed drives them to accumulate multiple homes driving out locals from their villages and towns and essential workers from living near their work.

If Ozzy raises tax on property speculators it will cause BTLers to stop dead in their tracks and perhaps cause multiple home owners to unload before the tax kicks in thus creating much needed supply at much lower cost to the property market. IF the taxes are from midnite on 22nd then the speculators are without hope and I have no sympathy for them--they gambled and they lost.

[alexw]

The figures don't lie, whatever you think about the ASI(I don't particularly rate then either) the figures and the report they quote spelt it out very clearly. How about this for example...

One myth that is consistently peddled by advocates of higher capital gains

taxes is that lower capital gains tax rates will somehow result in people

shifting income to capital gains. The facts do not bear this out. If it was so

easy to convert income to capital gains then how do countries who have a

GCT rate of zero still manage to raise significant revenue from income taxes?

You have an answer to that?

yes, though what you have posted is meaningless since it includes no figures, and even if it did it would almost certainly be ASI figures which i would not trust.

But in answer to your question, it simply states that places with 0% CGT still collect significant income taxes. However the vast majority do not have the ability to shift taxes from IT to CGT, though a significant minority do. Thus you can lose 10-20% from IT to CGT transfer, but still as that paragraph states still have significant income tax revenue.

So as i said the above statement is meaningless, and not surprising since it comes from the ASI. It's the type of thing you'd expect a bunch of 16 year olds to write for a school report (only the less capable ones, the more capable ones would do a better job). ASI is basically a rich mans tax lobby, and should not be trusted in any way shape or form to give truthful, meaningful, non-biased information. Simply because it won't be.

Edited June 20, 2010 by alexw

[Minos]

If it gives BTLers and multiple home owners a disincentive to carry on with their destructive speculation it will be a good thing.

The housing bubble has been the ruin of this country and it should be singled out for punitive taxation.

Gordon should go to the Tower.

I agree. The punitive taxation should be applied to the purchase though. Raise stamp duty.

[kilroy]

The idea that CGT is largely a voluntary tax is valid. If you don't sell, then you don't pay it. So unless you have to sell, if the rates are high, then you hang on to assets. My own example is a house (my wife's first house), bought in 1995 for about 45K, now apparently worth £250K. Say there was 50% CGT after the budget, so if I sold it, I'd pay £100K to the government. To sell as an asset shift in my investments would be barking mad - I'd have to be so confident of whatever else I was investing in, that I'd be willing to lose £100K. My new asset would need to have double the yield of the house. Stuff that, I'll keep the house and carry on renting it out.

CGT may well lead to a surge of selling before the tax comes in, but I think it will simply prevent properties that are investment assets coming onto the market afterwards. 40% CGT (same rate as IHT) leads to a "I'll keep it till I die mentality.".

The recent entrants to the property-is-my-pension brigade need capital gains and need to sell as their rental yields do not cover the mortgage. Subsidising their tenants for a coupla hundred quid a month when they had expected to have sold up and living off the gains does not sound like an option...

[the flying pig]

The figures don't lie...

shut up!

i had a quick look at the figures. they seem preposterous.

just by way of an example [the report really does seem to be this childish and risible] they appear to entirely attribute a late 90s spike in capital gains tax receipts to a CGT cut applied in 1997. nothing at all to do with the dotcom bubbly-wubble meaning that there were simply many billions more pounds of capital gains to tax ??

i'm not completely sure that they even control for inflation. it's so badly written that it's impossible to tell [the word 'real' crops up on a couple of isolated occasions when they're talking about the late 60s but not, as far as i can see, in any consistent or intelligible way].

they also singularly gloss over [i.e. do not mention, at all] any underlying changes that might make the headline rate of CGT misleading as an barometer of the overall CGT regime, e.g. taper relief, indexation, and so on [i refuse to believe that this did not change over the entire period of the 'study']. similarly they don't mention if and when any changes to definitions of 'short term' gains or whatever kick in.

Edited June 20, 2010 by the flying pig

[Boom Boom]

shut up!

i had a quick look at the figures. they seem preposterous.

just by way of an example [the report really does seem to be this childish and risible] they appear to attribute a late 90s spike in capital gains tax receipts to a CGT cut applied in 1997. nothing at all to do with the dotcom bubbly-wubble meaning that there were simply many billions more pounds of capital gains to tax ??

i'm not completely sure that they even control for inflation. it's so badly written that it's impossible to tell [the word 'real' crops up on a couple of isolated occasions when they're talking about the late 60s but not, as far as i can see, in any consistent or intelligible way].

they also singularly gloss over [i.e. do not mention, at all] any underlying changes that might make the headline rate of CGT misleading as an barometer of the overall CGT regime, e.g. taper relief, indexation, and so on [i refuse to believe that this did not change over the entire period of the 'study']. similarly they don't mention if and when any changes to definitions of 'short term' gains or whatever kick in.

Just about sums up the way those salivating over a CGT rise have insulated themselves from any facts pertinent to the issue. Again I quote...

One myth that is consistently peddled by advocates of higher capital gains

taxes is that lower capital gains tax rates will somehow result in people

shifting income to capital gains. The facts do not bear this out. If it was so

easy to convert income to capital gains then how do countries who have a

GCT rate of zero still manage to raise significant revenue from income taxes?

What's your answer?

[Sceptical]

Well, the report suggests a strong correlation in the US... but for arguments sake, lets assume this is true in UK also.

Could the reason for this be that when the rate goes up, affected taxpayers make more effort to avoid / evade the tax? If so, where does this leave us?

[Boom Boom]

Well, the report suggests a strong correlation in the US... but for arguments sake, lets assume this is true in UK also.

Could the reason for this be that when the rate goes up, affected taxpayers make more effort to avoid / evade the tax? If so, where does this leave us?

The reason isn't really important, it's the outcome that matters. It is guaranteed people make greater efforts to avoid CGT at a higher rate, and clearly some of this activity verges into illegal tax dodging. I think there is a threshold beyond which the average person simply feels as if they are being subjected to an unfair shakedown, and the result is that people relatively happily paying 18% with no taper, will go to extraordinary lengths to avoid paying 40% with no taper.

[Georgia O'Keeffe]

Well, the report suggests a strong correlation in the US... but for arguments sake, lets assume this is true in UK also.

Could the reason for this be that when the rate goes up, affected taxpayers make more effort to avoid / evade the tax? If so, where does this leave us?

What it also shows ignoring the tax is that when the stockmarket goes up (creating large capital gain) the amount of capital gain tax received goes up, whod have thunk it, when the stockmarket performs poorly, the amount goes down, truly shocking

[the flying pig]

Just about sums up the way those salivating over a CGT rise have insulated themselves from any facts pertinent to the issue. Again I quote...

One myth that is consistently peddled by advocates of higher capital gains

taxes is that lower capital gains tax rates will somehow result in people

shifting income to capital gains. The facts do not bear this out. If it was so

easy to convert income to capital gains then how do countries who have a

GCT rate of zero still manage to raise significant revenue from income taxes?

What's your answer?

er, excuse me, i've made a very pertinent criticism of the central premise of the study, that lower rates drive higher revenues, with reference to the late 90s US cut, which is one of their absolutely key data points. now, the girls and boys at the treasury might not be super-duper goldman sachs smart or whatever but i can assure you that they will have spotted this quicker than i did and that there will be plenty of shaking of heads, even laughter, at the ASI trying to get away with something so patently stupid. you know what, i might just do a little plot of CGT against the Dow, see what it looks like... maybe, if the footie tonight gets a bit dull.

now, what's your question... converting capital gains to income... er, this really does seem preposterous. everyone knows that a tax rate of zero earns you zero income, no matter how much, er economic activity it, er, encourages, it's just the maths of it... clearly, clearly if people in those countries were able to reclassify their income in a way that attracted a zero tax rate then tax receipts would be zero. no?

[rxe]

The recent entrants to the property-is-my-pension brigade need capital gains and need to sell as their rental yields do not cover the mortgage.

The recent entrants don't have any capital gains to tax. If you want to break the recent entrants, put interest rates up a few percent. CGT is going to theoretically hit people who have held assets for many years, not the fools that paid top whack in 2007.

[keeprenting]

Boom Boom

That report from the Adam Smith Institute quotes data from the US. The US has a different economy and culture to the UK - and, more importantly, a different tax system.

It is rather odd to quote figures from the US to make a point about the UK. Why not just quote the figures from the UK instead? That would seem a far more logical choice - I suspect the reason the Adam Smith Institute has not gone down the more logical path is because it leads them to the wrong conclusion.

Does anyone have any data to prove or disprove this? Certainly, there have been substantial fluctuations in the UK CGT rate. Did the amount of CGT collected rise when the rate was dropped to 18%?

[kilroy]

Just about sums up the way those salivating over a CGT rise have insulated themselves from any facts pertinent to the issue. Again I quote...

One myth that is consistently peddled by advocates of higher capital gains

taxes is that lower capital gains tax rates will somehow result in people

shifting income to capital gains. The facts do not bear this out. If it was so

easy to convert income to capital gains then how do countries who have a

GCT rate of zero still manage to raise significant revenue from income taxes?

What's your answer?

Fewer loopholes? It is p1ss easy to convert income to capital gains in the uk, to the point you can knock 75% off an arrangers' fees; you don't even have to earn 100k to benefit from it.