§ Mr. David Shaw
To ask the Chancellor of the Exchequer what studies Her Majesty's Treasury has made of the effect on the overall revenue from capital gains taxation of reducing the rate; and whether he will consider the results of studies undertaken in the United States of America.
§ Mr. Maude
Estimates of the effect of changes in capital gains tax rates allow for likely implications for the volume of disposals. If rates were reduced, the volume would be expected to increase, but not to the point where there would be an overall rise in tax receipts. Some studies in the United States have suggested that reductions there in the rate of capital gains tax might, for a period, increase tax receipts, but the results are the subject of considerable debate and other studies have suggested that any increase in revenue would be short-term and would quickly be followed by a fall in tax receipts. In any event, studies in the United States are not of direct relevance to the United Kingdom, because of differences between the two countries' tax regimes. In particular, most of those paying tax on capital gains in the United States would be below the annual exemption (for which there is no United States equivalent) in the United Kingdom, and, for the remainder, indexation relief means that the tax liability on gains would commonly be substantially less in the United Kingdom than in the United States. Limitations on data would make it difficult to replicate the United States studies in the United Kingdom.