Tax cuts really do not please people

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I'm on record as saying I think the cut in Capital Gains Tax to 18% is a straightforward disaster. But at least I have done so for reason of principle. I was amused to read the follwoing in The Telegraph this morning:

Furious insurers are demanding urgent talks with the Government after it emerged that they will lose billions of pounds in lost revenue should the Pre-Budget proposals for a flat rate of capital gains tax at 18 per cent come into force.

The Association of British Insurers fears sales of investment bonds - worth more than £20bn in 2006 - will grind to halt. Returns on life insurance-based products will continue to be classed as income and so higher-rate taxpayers will pay tax at 40 per cent. On the other hand, returns on products such as unit trusts will be treated as capital gains and taxed at 18 per cent. One senior insurance insider called it "a cock-up" and added: "This could be a disaster - we're buggered."

Or as another put it:

As a private investor, especially a higher-rate taxpayer, why would you invest in a bond now? The Pre-Budget Report has thrown financial planning into chaos.

It seems that these financial advisers aren't all that keen on tax cuts after all. It's the loopholes they like.

So much for the supposed desire of the Right for flat taxes, simplicity and low rates. They clearly don't suit them. It's one of the few lessons worth noting from this.