School of Economics (LSE) professor has defended chancellor Alistair
Darling’s proposed changes to the Capital Gains Tax (CGT), saying further reform
of CGT is necessary.
In an open letter to the editor of
Times, Willem Buiter, professor of European political economy, LSE European
Institute, urged Darling not to listen to his attackers, saying taper relief had
‘no more justification on grounds of efficiency or fairness than would tape worm
‘Further reform of the capital gains tax is required, integrating it fully
with the taxation of other forms of capital income, and indeed with the taxation
of labour income,’ he said.
‘Through trivially simple financial engineering (varying dividend payouts,
borrowing and share repurchases) listed companies can seamlessly transform
dividends into interest or capital gains. The same can be achieved by unlisted
companies when their owners sell the business. This means that, for simple tax
administration reasons and to preserve the capital income tax base, only a
common tax rate for all capital income, dividends, capital gains and interest,
makes sense. Sector, holding period, type of capital, nature of ownership, size
of firm, corporate form are all irrelevant.’
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