Capital gains tax warning

THE coalition proposal to raise capital gains tax (CGT) will result in less revenue for the Treasury, a right-wing think-tank has warned.

The Adam Smith Institute said increasing 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 18 per cent to 40 or even 50 per cent, depending on the level of income tax people pay.

But in a report published yesterday, the Adam Smith Institute said

CGT rises in the US and Australia had led to reductions in revenue. Conversely, decreases in the tax had led to rises in revenue.