Letter by prominent free-marketeers argues against CGT rise

Letter in The Daily Telegraph by prominent free market think tankers and economists argues that CGT rise will destroy growth, enterprise and jobs

SIR – Today is Tax Freedom Day, the day of the calendar year when we stop working to pay our taxes and start working for ourselves. Falling three days later than last year, it is a stark reminder of the increase in government involvement in the economy.

If borrowing, which is deferred taxation, were to be included, Tax Freedom Day would be in July. Government spending reductions – sufficient to allow medium-term tax cuts – must be the response, but tax rises would be a mistake. It is against this backdrop that we call for the Government to reconsider its position on increasing capital gains tax (Letters, May 23).

Many arguments against this move have been laid out in public over the last week or so, but we suggest that the increase is misguided for the following reasons: it discourages saving and ultimately investment; it leads to assets being sold at suboptimal times; it may cut the supply of affordable rented housing; and it penalises equity finance for companies yet further.

In addition, it may cause all this damage and yet raise no revenue, as some investors take expensive avoidance measures and others hold on to their assets in order to delay paying the tax.

Capital gains tax is, in short, a tax on growth, enterprise and jobs.

Signed:

Prof Philip Booth, Cass Business School; Dr Eamonn Butler, Adam Smith Institute; Prof Laurence Copeland, Cardiff Business School; Dr Ruth Lea, Arbuthnot Banking Group; Prof Graeme Leach, Institute of Directors; Mark Littlewood, Institute of Economic Affairs; Prof Patrick Minford, Cardiff Business School; Prof David Myddelton, Cranfield School of Management; Dr Madsen Pirie, Adam Smith Institute; Matthew Sinclair, TaxPayers' Alliance; Prof David B. Smith, University of Derby; Richard Teather, Bournemouth University Business School; Dr Peter Warburton, Economic Perspectives