HC Deb 18 December 1975 vol 902 cc1639-41
19. Dr. Phipps

asked the Chancellor of the Exchequer by what amount the level of capital transfer tax would need to be increased to raise the same revenue envisaged for the wealth tax as proposed in the Green Paper.

Mr. Denzil Davies

The increase in rates which would be required to secure a yield equivalent to a wealth tax on illustrative Scale A would be about two-thirds, with a maximum rate of 100 per cent. applying to slices of capital over £150,000. For scale B the rates would need to be more than doubled with a similar maximum above £80,000. Both calculations are on the basis of the present capital transfer tax threshold and rate bands.

Dr. Phipps

Does my hon. Friend agree that both economically and socially the capital transfer tax is fundamentally more important and significant than the wealth tax? In view of the results of the Select Committee that considered wealth tax, does he think that the opportunity should be taken in the Budget to raise capital transfer tax levels significantly and to make them more progressive at higher rates?

Mr. Davies

I do not agree with my hon. Friend entirely. The two taxes are complementary. The capital transfer tax is a tax on the transfer of capital. The wealth tax is a tax on the accumulation and aggregation of capital. To that extent I do not think that they can be equated. However, we shall take into account their inter-relationship in framing our proposals.

Mr. Pardoe

Is the hon. Gentleman aware that we must regret that the Chancellor has not taken the opportunity of this Question to lash the Select Committee that considered wealth tax for its five reports? Will he confirm that the committee produced good value for money for the House? Will he undertake to tell his right hon. Friend that we do not want him to hide his reaction to the Select Committee in a Written Answer before the Christmas Recess?

Mr. Davies

Having served on the Select Committee and having seen how some Opposition Members tended to use it as if it were a Standing Committee, I am not sure how much value we can draw from the evidence of the Select Committee.

Sir David Renton

When giving further thought to the capital transfer tax, will the hon. Gentleman and his colleagues bear in mind that the provisions relating to small or medium-sized discretionary trusts can bear very harshly on family properties which are not endowed with funds for periodic payments?

Mr. Davies

These are matters that we shall consider, but in the main discretionary trusts are used as vehicles for very wealthy people to avoid paying taxes.