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UK government mulling over CGT changes

The Adam Smith Institute has today stepped into the UK capital gains tax debate with a suggestion that an increase to somewhere near income tax rates could actually reduce net tax receipts for the UK government. The institute believes that a rise in UK capital gains tax could actually cost the government up to £2.5 billion a year in tax revenues with investors discouraged from selling assets such as property and shares.

On the face of it you would expect an increase in capital gains tax receipts because of the proposed increase in the rate. However, if we really do see investors holding back from selling their assets then this will see less money released for the future which would mean less money being pumped into the UK economy. There is also the chance that investors may well begin to look overseas if UK rates are so high as to make it difficult to make a "reasonable profit".

There are many different ways to look at the capital gains tax issue and many different bodies will step forward over the next few days to put their particular arguments forward. However, the truth is that the UK government is stuck between "a rock and a hard place" with national debt higher than ever before, the budget deficit likely to remain significant for years to come and an economy which is struggling to push ahead.

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