§ Mr. Morgan asked the Chancellor of the Exchequer (1) whether his Department has considerd the introduction of (a) indexation and (b) tapering in the computation of capital gains, with a view to ensuring that capital gains tax is levied only on real and not on nominal gains or gains on paper, which may, in real terms, reflect capital losses;
§ (2) what would be the estimated additional cost to the Treasury of operating systems of (a) indexation and (b) tapering in the computation of capital gains tax liability; and on what basis the additional cost figures have been calculated.
§ Mr. Ridley:My hon. and learned Friend will already know that we have examined thoroughly the possibility of indexing or tapering the tax. Our conclusions have been those to which my right hon. and learned Friend the Chancellor of the Exchequer referred to in his Budget Statement last year. Both proposals would result in an unwelcome increase in the cost of administration—for taxpayers as well as for the Revenue—while drastically reducing the yield.
The precise measure of these additional costs depends on the specific adjustments to be made to the computation, but these could result in the Inland Revenue employing more than 1,000 staff to collect not much more than £100 million. I can, however, assure my hon. and learned Friend that we have not forgotten our commitment to make capital taxes simpler and less oppressive.