Capital gains tax (1)

The Goblin King knows that a large part of economic growth over the last ten years was fuelled by the house price & credit bubbles, so he is now in a bit of a panic over signs that the bubble has reached the top of the eighteen-year cycle and is now starting to deflate.

This is the Goblin King's fourth desperate throw of the dice in shoring up property prices:-
1) The idea that your pension fund can have buy-to-let properties (an idea which was strangled at birth).
2) Introducing REITs to funnel money into commercial property. Didn't work, REITs shares are down by "20% to 30%" this year.
3) Restricting supply by introducing HIPs.
4) Encouraging buy-to-letters to hang on until next April 2008 before selling - if they sell now they'll have to pay up to 40% CGT, if they wait six months, they'll only pay 18%.

But it won't work. Look at the USA, Ireland, Spain and the residential and commercial property markets in the UK. And heaven knows where else.

Goblin King, you one-eyed lying bastard, this thing is far bigger and more powerful than you! There is nothing you can do to stop it! It will crush you!

The other bit was this legend that private equity chaps don't pay enough tax, which is bollocks actually, as I have explained here.

And so The Goblin King and The Badger came up with this idea of harmonising CGT at a flat rate of 18%. Of course the losers in this are people who expected to pay 10% on the sale of their businesses, who are now whining that their CGT bill will increase by 80%, which is mathematically correct.

Two more things that are mathematically correct are:
1) An entrepreneurs after tax proceeds wil fall by 8.9% (they'll keep £82 for every £100 gross gain, rather than £90).
2) When The Goblin King took over, CGT was a flat 40%, although there was something called retirement relief for older people who sold their businesses.

* As it happen, if it were up to me I'd scrap CGT completely, as part of a wide ranging reform and simplification of the tax and welfare system. That is a whole 'nother topic.