Extraordinary headlines have been used to report the UK Institute of Directors' (IoD) new report on capital gains tax and inheritance tax. For example, Accountancy Age has said:

The Institute of Directors has called for the threshold for CGT to be lowered, and for the tax to be simplified, to enable more tax to be raised.

That's simply not true. The proposal is actually quite clear. With regard to Inheritance Tax it says:

Inheritance tax (IHT) has come to impose a significant burden on many families which do not have great wealth. It has come to be a tax on thrift, at a time when it is crucial to encourage saving, rather than discourage it.

It provides no evidence that IHT is a tax on thrift. Nor does it prove that there is a need for additional saving which might be subject to the tax (pensions, for example are not and that seems to be where the savings shortfall is). On CGT the proposal is as clear:

The main simplification of CGT is to replace the current two scales of taper relief, under which the taxable proportion of a gain diminishes as the period of ownership of the asset increases, with a single scale. Crucially, if an asset had been owned for long enough, the gain would not be taxable at all. Thus no computations would be needed for assets that were held for the longer term. The proposal is to tax 100% of a gain if the asset has been held for up to a year, 90% if the asset has been held for one to two years, 80% if the asset has been held for two to three years, and so on down to taxing none of a gain if the asset has been held for more than ten years.

Let's be clear. What that's saying is in the short term there are no such things as capital gains, there are only profits from trades. That seems entirely reasonable. But the obvious corollary is that real capital gains should be tax free. In other words, in all but name they're saying capital gains tax should be abolished as well, with gains short term gains being considered trading profits. This is unsurprising. Their conceptual framework for capital taxes is this:

Objective 1: to make a reasonable contribution to total public revenue.
Objective 2: to avoid an imbalance between the taxation of returns in different forms, for example income from investments and capital gains on investments.
Objective 3: to accomplish objectives 1 and 2 simply.
Objective 4: not to discourage saving too much. Savings by individuals mean that they can avoid being a burden on other taxpayers later in life. Saving is an act of social responsibility, as well as benefiting the saver.
Objective 5: not to discourage investment too much. People should not be put off investing in businesses which have a prospect of doing well and delivering significant returns to investors by the thought that if those returns materialise, they will be reduced by a large tax bill to a level that is not commensurate with the risk taken. The productive use of money in the private sector is crucial to economic growth.

Plain straightforwardly, that's wrong. First of all, point 4 is simply incorrect. The savings so described are pensions, and are never subject to capital gains tax or IHT and do enjoy generous income tax reliefs. The only issue on IHT at the moment is that some people are paying tax when they sell the family home as a deceased generation no longer needs it - which means the value is as much open to charge as any other asset and serves to limit the absurd growth in house prices which are already fuelled by capital gains tax relief in this area. Second, point 5 is wrong as existing rules on CGT are much more generous to genuine risk taking investment than this proposal, and IHT is not charged on investment in genuine risky enterprises. So the claims made are rhetoric, not fact.

That's true of this objective statement as a whole. It is, in fact, simply wrong. Capital taxes exist for the following reasons:

1. To tax wealth which otherwise avoids any form of taxation, so broadening the tax base;
2. To ensure that the tax base is progressive;
3. To provide for the reallocation of wealth and the reduction in the gap between the rich and the poor - which is enormously socially destructive;
4. To prevent leakage from income tax;
5. To raise revenue.

The IoD is dressing up a straightforward desire to remove tax on the wealthy as somehow having a logical structure and philosophy behind it. Their arguments are hollow. Their naked greed is apparent. Their indifference to passing the tax burden onto those less able to bear it is noted.

Perhaps the report's cover says all that needs to be known about the IoD's real thinking. Tax is not a bomb that threatens people. Tax is what underpins the social structure of our society and provides people with the opportunity to thrive.