Over the last couple of years the pretty lame Office for Tax Simplification has made a range of recommendations for the reform of capital gains tax and inheritance tax.
Yesterday we finally learned of the government's reaction. As the FT notes:
The UK has shelved proposals to raise capital gains tax rates to align them with income tax and slash the levy’s annual allowance, moves that would have hit the wealthy.
As they added:
On Tuesday, in a letter to the OTS, the Treasury passed over the suggestions made by the group in its first report on CGT, which included the proposal to consider raising the rates and lowering the allowance.
The proposals by the OTS made total sense and will be referred to in my ongoing series on taxing multimillionaires, which should recommence tomorrow.
The government said when justifying ignoring the OTS recommendations:
“These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC,”
I think it very easy to read into that what the true message is. The wider policy trade-off is that this move might hit the wealthiest, might collect more tax from them, might reduce inequality and could potentially challenge the austerity narrative that the government wishes to pursue. Since none of those things is desirable in the government's view of course this change was not going to happen.
As there was any doubt about this the Treasury also rejected making any changes to inheritance tax — as suggested by the OTS in 2018 and 2019.
So, government policy is confirmed as 'leave the rich alone when it comes to tax' as part of its ongoing programme of destroying society as we have known it.