As noted in this blog back in August, the end of Labour rule in the U.K. will not mean the end of big government in that country. The new coalition government has already proposed a large tax hike on capital gains:
At present investors only pay CGT of 18pc on gains cashed-in of more than £10,100 each year. Only 200,000 currently pay the tax. But under the new regime gains cashed-in will be taxed at a person’s highest income tax rate, up to 40pc.
http://www.dailymail.co.uk/money/article-1278532/Capital-gains-tax-hike-trigger-big-sell-off.html?ito=feeds-newsxml#ixzz0nwRJTgeL
And not surprisingly, investors are acting rationally and changing their behavior to minimize their tax bills:
Investors are expected to start selling shares and second homes ahead of a rise in capital gains tax (CGT) signalled by the new government this week…Investors who were planning to sell their assets during the next year are being advised by Cazenove Capital to bring sales forward to crystallise capital gains at the current rate, while Deloitte said it expected “lots of clients” to sell assets now.“Clients with large capital gains should think about enjoying the current CGT rate while it lasts – ie sell,” said Charlie Hoffman, head of HSBC Private Bank. http://www.ft.com/cms/s/2/4ee31052-5f7b-11df-a670-00144feab49a.html
If the British system of tax revenue forecasting is anything like the one in America, look for these increases to produce substantially less revenue than expected.
