Capital gains tax plan is a loser

PROPOSED increases by the coalition government of the current 18 per cent capital gains tax threshold to 40 or even 50 per cent would be incompetent and stifle continued economic recovery.

Such an increase will not bring in the estimated extra revenue to the Treasury. Instead, it will diminish funds coming in and widen the deficit rather than narrowing it, as well as discouraging much-needed investment.

The experience of other countries, notably the United States and Australia, indicates 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.

In intending to raise capital gains tax, without understanding the effects of their actions, the coalition government is proposing measures that will decrease the Treasury's tax take and make the deficit even worse. This hardly qualifies as sensible economic policy.

Alex Orr, Edinburgh