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Labour considers radical shake-up of capital gains tax

London UK Thames Parliament 480

Labour is considering a radical overhaul of capital gains tax after a new report recommends a 50 per cent rate that tapers down to 10 per cent over 10 years.

The Labour-commissioned report, published today and authored by former Institute of Directors director-general Sir George Cox, suggests major changes to the UK tax regime in order to encourage long-term thinking in British business.

The report follows the Government’s own review into short-termism in the equity markets by economist John Kay, published last year.

Cox’s report states: “Taxation treatment should be changed to attract long-term investors back into the equities market and to incentivise longer-term shareholding. This should encompass both individual shareholders and funds.

“For example, capital gains tax on shares could be tapered, in a series of yearly steps, from a rate of 50 per cent in year one to 10 per cent after year 10.

“Liability for tax on dividends could be reduced, in a series of yearly steps, from the prevailing rate of income tax in year one to 0 per cent after year 10.”

The report also recommends abolishing stamp duty for shares traded in AIM-listed firms to boost the liquidity of the market. The taper for taxation on dividends could be accelerated from 10 years to five years on AIM-listed firms.

It wants to see venture capital trusts and enterprise investment schemes “enhanced”. It suggests the rules banning anyone with a 30 per cent stake in a firm and employees from investing in EIS should be scrapped.

The paper also calls for an end to quarterly reporting and more discussion about long-term strategy in firms’ results, which has been previously backed by leader Ed Miliband. It also calls for up to 30 per cent of executive directors’ pay to be deferred and based on results over five years.

Shadow chancellor Ed Balls says: “Sir George’s report sets out a clear plan for creating that more long-termist economy including radical reforms to executive pay, tougher rules on takeovers and encouraging longer-term shareholding and we will now study his detailed proposals as part of our policy review.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. This is not SIMPLIFYING the tax system. Why not do away with cgt completely to be radical? Why should you get any tax incentive to invest, you do it for thge profit ! Same with pension tax relief, you save for retirement or starve, it doesn’t need a tax incentive.

  2. They should employ the same thinking into government – not making policy that will win votes but that will help the country longer term.

  3. How can anyone in the UK own a business or plan their future when the changing Governments of this country continually make secismic shifts in policy. What a jokers these politicians are!

  4. What is it with politicians and so called economists who try to make things more complicated than they need to be. Surely this is going to complicate the tax system rather than simplify it.

    We got rid of taper relief because it was too complicated to administrate and because of the wide spread abuse. Now this so called Labour study is wanting to reintroduce taper relief on a so called belief that it will encourage long term share ownership. The fact is the UK has some of the lowest ownership of shares in the UK partly due to governments both Labour and Conservative messing around with pensions, ISA’s and CGT, is it any wonder the general public have no faith?

  5. Sounds a lot like “taper relief” which the then Labour government abolished in 2008 in a knee-jerk reaction to stories about how the PE industry was able to use this to shelter gains made. Also ironic as it was an earlier Labour administration which had introduced taper relief in the first place. Will be interesting to see how the handle this change of stance…

  6. Anonymous | 5 Mar 2013 10:52 am

    Same with pension tax relief, you save for retirement or starve, it doesn’t need a tax incentive.

    Seeing as the majority of the UK are not providing for retirement even with tax incentives taking them away would probably just make the problem worse. Not everybody can have their pension contributions deducted from pay so they pay no tax. Giving the rest of us a tax incentive at source (incidentally I’ve paid tax on the income to pay the pension in the first place) just equalises the situation. I will then be taxed on the income from the pension for the rest of my life so of course it makes sense to encourage people like me to pay into a pension. Or, I will get out the old begging bowl and ask for income support then you’ll end up keeping me as well.
    I’m sure you’ll like that?

  7. Oh dear – more political interference. Politicians should not be allowed to meddle with the tax system or rates; it should be an independent body that then advises our useless politicians how much money they have to spend and if they spend above that amount they (the politicians) fund the gap – that would sort out a few political idiots

  8. More bollocks from the mouth of Balls!

    The sooner we find a planet in a far away universe where we can send politicians the better.

  9. I should have thougth cgt on share dealing would be better being abolished all together! give people money, and guess what! they spend it.

    This is typical English boneheaded thinking (Again). When the **** is anything going to CHANGE!!! Just makes me feel like grabbin hold of em by the lapels and shakin the s*** out of them.

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