The Adam Smith Institute has put forth a supposition that an increase in the UK capital gains tax, to a level close to the income tax rates, could result in the reduction of net tax receipts for the UK government. Such a hike in the UK capital gains tax will, according to the institute, put off investors from selling assets such as shares and properties and thus cost the government an additional £2.5 billion every year in tax revenues.
This scenario may result in investors holding on to their assets and consequently less money being diverted into the UK economy. There is also a possibility of investors finding UK rates too high and therefore turning their attention to overseas markets.
Close on the heels of the Adam Smith Institute’s hypotheses, many different bodies are also expected to present their theories in relation to the capital gains tax debate. The UK government’s mettle will surely be tested in the coming days, with the UK economy moving along at snail’s pace, national debt at an all-time high level and a significant budget deficit to counter.
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