Why not get rid of Capital Gains Tax?

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I was at the ICAEW's Philip Hardman lecture last night. I admit, it's a bash usually worth attending and this year was no exception.

The lecture was Mike Truman, editor of Taxation magazine and at least once or twice commentator on this blog or issues it raises.

Mike's theme was simple. It was "can a fair tax system ever be simple". To his credit Mike never once mentioned flat taxes. Better still, he addressed his subject with a considerable social conscience on display, and on several occasions it would have been hard to spot the difference between what he said and the content of the Tax Justice Network Code of Conduct on Taxation.

Take this as an example. Mike argued that tax requires horizontal and vertical equity, That means people on the same income are taxed the same and people on higher incomes are taxed proportionately more than those on lower income, Quite right too.

Then he argued in favour of the latest Capital Gains Tax reforms by Chancellor Alastair Darling because a) they abolished the distinction between business and other assets and b) gave no tax incentives hold assets for the long time when economic rationality should indicate they should be sold.

I buy that argument but I attach a condition, which I sought to present to Mike as a question, which time did not allow. If you want horizontal and vertical equity and you don't want to differentiate the tax treatment of disposals dependent on time held or type of asset isn't there a massive tax simplification that is readily available, which is to charge all capital gains to income tax?

I put the point to Mike afterwards, and he agreed with my point. Indeed, he said the suggestion had been in his draft. But he'd thought it might cause too much indigestion over the dinner that followed.

Have courage Mike, say I. Indigestion is temporary. Tax justice is for keeps!