Boston Globe: Saved by the crown

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23 May 2010

The Boston Globe reports on Eamonn Butler's comments that we should have a Monarchy willing to act as a check the other parts of government.

Extract from article published in the Boston Globe here. 

Yorkshire Post: Capital gains: Think-tank claims tax rise will reduce Treasury's take

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Old Teaser

22 May 2010

The coalition Government's proposal to put up capital gains tax will result in less revenue for the Treasury, says a Right-leaning think-tank.

The Adam Smith Institute says increasing capital gains tax will widen the deficit rather than narrow it.

The Conservatives and Liberal Democrats have agreed to tax non-business capital gains at rates "similar or close to those applied to income". This means the tax could be increased from its current level of 18 per cent to 40 per cent or even 50 per cent, depending on the level of income tax people pay.

But in a report published today, the institute says investors believed the measure would be temporary and would therefore defer capital gains realisations until the rate reduced again. This would lead to a "sharp decline" in tax revenues.

Its president, Madsen Pirie, said: "In intending to tax the rich, politicians, without understanding the effects of their actions, are proposing measures which will decrease the Treasury's tax take and make the deficit even worse. This hardly qualifies as sensible economic policy."

The report found that capital gains tax rises in the United States and Australia had led to reductions in revenue. Conversely, decreases in the tax led to rises in revenue.

The institute said it was "highly likely" that these negative revenue effects of a rise in the tax would be more accentuated in the UK because investors realised there was a "cited short-term need" to raise revenues to pay down debt.

Any increases in the tax would be introduced largely for political reasons and not as a result of evidence-based policy-making.

Investors also understood that the "major party within the coalition does not believe in the CGT tax increases and will seek an early opportunity to reverse them".

The institute said revenues fall when the capital gains tax rate rises because they are "voluntary taxes", unlike income taxes.

The report said: "While everyone needs to work and bring in an income, the same is not true of making capital gains.

"No one needs to pay capital gains taxes except in times of financial distress. Taxpayers can simply avoid selling assets that are subject to the tax and also avoid buying assets that are subject to the tax." 

Published in Yorkshire Post here.

Daily Express: Tax rise to cut revenue

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Old Teaser

22 May 2010

THE plan to raise capital gains tax will cut revenue for the Treasury, a think-tank warned yesterday.

The Adam Smith Institute said increasing CGT would widen the UK’s deficit rather than narrow it.

The new coalition government has agreed to tax non-business capital gains at rates “similar or close to those applied to income” meaning CGT could soar from its current level of 18 per cent to 40 or 50 per cent, depending on the level of income tax people pay.

But in a report the ASI said investors believed the measure would be temporary and would defer capital gains realisations until the rate fell again, leading to a “sharp decline” in tax revenues.

The Treasury said: “There are a range of possible options to fulfil this aim on capital gains tax and no decision has yet been taken.”

Published in the Daily Express here. 

Press Association: Raising tax 'will widen deficit'

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Old Teaser

22 May 2010

The coalition Government's proposal to put up capital gains tax will result in less revenue for the Treasury, a right-leaning think-tank has warned.

The Adam Smith Institute (ASI) said that increasing capital gains tax (CGT) would widen the deficit rather than narrow it.

The Conservatives and Liberal Democrats have agreed to tax non-business capital gains at rates "similar or close to those applied to income".

This means CGT could be increased from its current level of 18% to 40% or even 50%, depending on the level of income tax people pay.

But in a report published on Friday, the ASI said investors believed the measure would be temporary and would therefore defer capital gains realisations until the rate reduced again. This would lead to a "sharp decline" in tax revenues.

Madsen Pirie, ASI president, said: "In intending to tax the rich, politicians, without understanding the effects of their actions, are proposing measures which will decrease the Treasury's tax take and make the deficit even worse. This hardly qualifies as sensible economic policy."

The report found that CGT rises in the United States and Australia had led to reductions in revenue. Conversely, it was decreases in the tax that had led to rises in revenue.

The ASI said it was "highly likely" that these negative revenue effects of a CGT rise would be more accentuated in the UK.

This was because investors realised there was a "cited short-term need" to raise revenues to pay down debt.

Any CGT increases would be introduced largely for political reasons and "not as a result of rational, evidence-based policy-making".

Published by Press Association here.

ITN: Capital gains tax increase 'will widen deficit'

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Old Teaser

22 May 2010

The coalition Government's proposal to put up capital gains tax (CGT) could result in less revenue for the Treasury, according to the Adam Smith Institute.

The Conservatives and the Liberal Democrats have agreed to tax non-business capital gains at rates "similar or close to those applied to income".

This means CGT could be increased from its current level of 18 per cent to 40 per cent.

But, in a report by the Adam Smith Institute, investors are said to believe the measure would be temporary and would defer capital gains until the rate reduced.

The reports said: "Taxpayers can simply avoid selling assets that are subject to the tax and also avoid buying assets that are subject to the tax."

Madsen Piries, president of the Adam Smith Institute, said: "In intending to tax the rich, politicians, without understanding the effects if their actions, are proposing measures which will decrease the Treasury's tax take."

Published on ITN.co.uk here. 

Capital Gains Tax increase will yield less revenue

22 May 2010

 

• The Adam Smith Institute claims the proposed increase in Capital Gains Tax will not bring expected extra revenue
• In US and Australia increase in capital gains tax led to less revenue
• Negative effect of CGT will be even sharper in UK

The increase in Capital Gains Tax proposed by the coalition government will not bring in the estimated extra revenue to the Treasury, according to a new paper from the Adam Smith Institute (ASI). Instead it will diminish funds coming in and widen the deficit rather than narrowing it.

The ASI's research looks at the experience of other countries, notably the United States and Australia, and shows that increases in the rates of capital gains taxes there have led to reductions in revenue. Conversely, it has been decreases in the tax that have led to rises in revenue.

The effect will be even sharper in the UK, claim the Institute. Unlike income tax, capital gains tax can be voluntary - people can decide when to cash in their gains and may postpone this. As the proposed increases are widely seen as temporary and are likely to be lowered later, many people will leave their assets to await a more benign tax rate. The normal annual flow will diminish, leading to a sharp drop in revenues, and reinforcing the experience of other countries.

The Institute also disputes the suggestion that when capital gains tax levels are below those of income tax, people will switch from one to the other to escape taxation. It quotes figures from several countries, which suggests that this does not happen in practice.

The government should not impose an across-the-board increase in Capital Gains Tax, but should instead distinguish between short-term speculative gains and long-term asset appreciation. Without that distinction, the proposed tax increase will do serious harm to the economy. Madsen Pirie, president of the Adam Smith Institute, says:

"In intending to tax the rich, politicians, without understanding the effects of their actions, are proposing measures which will decrease the Treasury's tax take and make the deficit even worse This is hardly qualifies as sensible economic policy."

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Daily Telegraph: It is unfair to punish long-term investors

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Old Teaser

Written by Michael Forsyth

19 May 2010

When, in 2008, Gordon Brown introduced a flat rate of capital gains tax at 18 per cent, he also simplified the system. This involved removing a complex labyrinth of allowances and reliefs, which treated different types of assets in different ways and took account of length of time in ownership and the effects of inflation.

From a government that had more than doubled the size of the tax code, it was an unusual and welcome step. George Osborne had quite rightly campaigned in opposition for simpler, flatter, fairer taxes. This marked a victory for his approach.

Of course, Brown went on to increase the top rate of income tax to 50 per cent, creating a greater incentive for people to invent schemes to achieve returns which are taxed as capital gains rather than income. The problem we have, then, is not that capital gains tax is too low, but that the marginal rate of income tax is too high. The independent Institute of Fiscal Studies, the Centre for Policy Studies, the Adam Smith Institute and a chorus of others have warned that the increase to 50 per cent is unlikely to produce additional revenue. 

Published in the Telegraph here.

Daily Telegraph: It is unfair to punish long-term investors

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Written by Michael Forsyth

19 May 2010

When, in 2008, Gordon Brown introduced a flat rate of capital gains tax at 18 per cent, he also simplified the system. This involved removing a complex labyrinth of allowances and reliefs, which treated different types of assets in different ways and took account of length of time in ownership and the effects of inflation.

From a government that had more than doubled the size of the tax code, it was an unusual and welcome step. George Osborne had quite rightly campaigned in opposition for simpler, flatter, fairer taxes. This marked a victory for his approach.

Of course, Brown went on to increase the top rate of income tax to 50 per cent, creating a greater incentive for people to invent schemes to achieve returns which are taxed as capital gains rather than income. The problem we have, then, is not that capital gains tax is too low, but that the marginal rate of income tax is too high. The independent Institute of Fiscal Studies, the Centre for Policy Studies, the Adam Smith Institute and a chorus of others have warned that the increase to 50 per cent is unlikely to produce additional revenue. 

Daily Telegraph: Rebuilding Britain: what do we need?

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Written by Dr Eamonn Butler

18 May 2010

New Zealand’s Labour government in the 1980s turned around a country gummed up by regulation and fat government. They introduced inflation targeting to make their money sound again and set entrepreneurs free by pruning regulation department by department, quango by quango.

An offbeat but important part of New Zealand’s revolution was to make its government follow the same international accounting rules it imposes on everyone else. In other words, when politicians make promises – higher pensions, bigger benefits, more new schools and hospitals – they have to identify and provide for their future cost. No living high on the hog today and leaving our children with the debts to pay.

he East European republic of Georgia turned itself round by imposing strict rules on government spending. President Mikheil Saakashvilli wants a constitutional amendment to cap government spending at 30 per cent of GDP, the budget deficit at 3 per cent, and the national debt at 60 per cent of GDP so future Georgian governments won’t be able to get into the same pickle that Gordon Brown has got us into.

We also need a version of America’s 1989 President’s Council on Competitiveness, which subjected every new legislative and regulatory proposal to analysis by economists and accountants, to challenge the spin and calculate their real economic burden on trade, competitiveness, and jobs. (Not surprisingly, few ideas from Congress survived.)

America can also teach us about sunset rules on quangos – if their lives are not consciously renewed each five years, they expire. And budget ballots, too – many US localities require a public referendum to approve the state budget. No agreement by the people, and the politicians can’t do anything at all.

Published in the Telegraph here.

The Politics Show, BBC South East

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Old Teaser

16 May 2010

Tom Clougherty of the Adam Smith Institute discusses the need for the government to go further than efficiency savings and to consider cuts in the public sector pay role.

Click here to watch the video

(approximately 40minutes into the programme)