Unfortunately, we're not going to get away with paying less tax any time soon and in most cases we'll end up paying more as the government tries to dig us out of the recession. However, despite the need of the coalition to boost revenue there have been calls for capital gains tax (CGT) to be abolished.
CGT is a voluntary tax – you only have to pay it if you sell or give away assets that you make a gain on – so people choose quite often not to pay it by holding on to assets.
Tory peer Howard Flight thinks that this inclination to hold on to assets, maybe in the hope that the rate of CGT will change back to pre-2010 rates when there was a flat rate of 18% for everyone (now higher rate taxpayers pay 28%).
Flight makes some sensible points. The fact is that CGT doesn't actually bring in that much revenue – around £4 billion a year. Considering the amount of assets – shares, funds, second properties – that people hold that's not a huge amount of revenue.
Flight also has a supporter in former defence secretary Liam Fox when it comes to abolishing CGT, who said we should make up the lost revenue by making savings in welfare.
Now, while Flight's paper – which he wrote for the Centre for Policy Studies – makes sensible suggestions but there is a concern that cutting CGT will be seen as another tax break for the wealthy (which in a way it is).
Those on lower incomes will hold far less assets than the wealthy and the majority of people probably don't even use up their annual CGT allowance. It is particularly galling when you have Fox recommending using welfare cuts to fund a CGT cut. This is proposing a reverse Robin Hood tax of taking from the UK's poorest to give to the wealthiest.
Yes, CGT doesn't bring in much tax and maybe it would tell the rest of the world that Britain is open for business as Fox believes, but surely we should be concerned about how our own citizens will feel rather than worrying about the rest of the world. I'd imagine that cutting CGT would been seen as another sop to the wealthy.