Reforming ‘Unfair’ CGT Could Raise £145 Billion
According to a left-wing think tank, wealthy property investors benefit from an ‘unfair and outdated’ tax system.
The Institute for Public Policy Research (IPPR) calls for tax reforms that align capital gains tax rates with income tax.
The think tank argues scrapping CGT and grouping all earnings under income tax would generate more cash for the Treasury and is fairer to ordinary workers.
“It is fundamentally wrong that people who get their income from betting on the stock [market] or playing the property market pay less tax than those who go out to work,” IPPR director Tom Kibasi said.
He explained that a worker earning £50,000 a year pays tax at 20% and 40%, while an investor making the same from property pays CGT at 18% or 28% but gains more from reliefs and exemptions to reduce the tax bill.
“This dynamic means the rich can continually get richer, while everyone else struggles to catch up,” the study said.
“Raising taxes on income from wealth to the same level as those on income from work is a necessary step to break this cycle.
“It is profoundly unjust that those who work for their incomes are taxed more highly than those whose income is derived from wealth.
“This situation is all the worse when we consider that the wealthiest are less likely to generate their income from labour than the rest of us. Among the richest 1%, over one-quarter of total income is generated from dividends and partnership income alone.”
The IPPR reckons the CGT reforms could raise between £105 billion and £145 billion in additional tax revenues over five years.
“There are large uncertainties around these estimates, but we still expect these changes to raise significant sums. Our proposal would substantially increase revenues and make the tax system fairer,“ says the study.
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