Is there really a need to increase capital gains tax?
Rumours of an increase in capital gains tax to as high as 50%, in line with the top income tax rate, do not make good reading for the investment arena and there are many who believe that it may be counterproductive. There's also the fact that capital gains tax is renowned as one of the most expensive taxes to collect and many experts are now questioning whether we actually need an increase in capital gains tax.
The problem with capital gains tax is the often complicated calculations required which can in some cases cause problems with personal returns. There's also the fact that by increasing capital gains tax the government is effectively taking more money out of the economy and specifically more money out of the investment arena at a time when liquidity is still relatively low. Indeed some people believe that an increase in capital gains tax could actually see net tax receipts fall for the UK government due to complicated knock on effects and the potential for people to be pushed overseas.
While this seems to have been a Liberal Democrat led strategy, David Cameron and George Osborne will need to be very careful before implementing such a massive increase in capital gains tax.
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