§ Mr. LawsTo ask the Chancellor of the Exchequer what his estimate is of the reduction in the level of capital gains tax receipts in each of the next five years as a result of the reduction in the capital gains tax rate from 40 per cent. to 10 per cent. for assets held for longer periods; and if he will make a statement. [22475]
§ Dawn Primarolo[holding answer 13 December 2001]: The total costs of capital gains tax taper relief for business and non-business assets for 2000–01 and 2001–02 are given in the Tax Ready Reckoner and Tax Reliefs, which was published on 27 November 2001. These are £360 million and £580 million respectively. Estimates for future years are highly dependent on assumed growth in assets values.
§ Mr. LawsTo ask the Chancellor of the Exchequer what his estimate is of the effect on the yield from the upper income tax rate of 40 per cent. as a consequence of the introduction of a capital gains tax rate of 10 per cent.; and if he will make a statement. [22476]
§ Dawn Primarolo[holding answer 13 December 2001]: The proposed modifications to the taper relief rules for business assets are not expected to diminish the income tax yield to any significant extent because the effective capital gains tax rate of 10 per cent. will not be reached until the asset in question has been held for two years, and because there are rules already in place ensuring that income is charged to income tax.
We shall, however, be keeping the position under close review and will not hesitate to take action to protect the income tax yield if tax avoidance schemes for turning income into capital are introduced.